Nokia Clinches Part Of China Mobile's 100G Network Project

China Mobile Ltd. (NYSE:CHL) , the largest wireless operator in China and Finland-based Nokia (HE:NOKIA) Corporation (NYSE:NOK) seem to have strengthened their alliance in the optical network space. China Mobile recently offered a 30% partnership to Nokia in its 2016-2017 100G optical network project to rollout mobile broadband services for the world's largest 4G network. The 100G optical network deal has been structured to support the ‘Broadband China’ strategy, the country’s efforts to meet rising mobile data demand in the cloud era.

However, this new contract is subject to the initial one-year framework deal worth €1.36 billion ($1.5 billion), which was signed by Nokia and China Mobile in Jun 2016.

“Broadband China” Strategy

China Mobile’s 100G project is based on the “Broadband China” strategy. Under the deal, China Mobile will help Nokia utilize its 100G Optical Transport Network (OTN) and Dense Wavelength Division Multiplexing (DWDM) backbone based on the recently announced packet-optical transport platform – Nokia 1830 PSS-24x. The centerpiece of the network architecture is a four-port 100G DWDM line card for Nokia 1830 PSS-24X. This high density line card leverages the Photonic Service Engine 2 Compact (PSE-2c) – Nokia's low-power 100G-optimized digital signal processor. In combination with CFP2 (C form-factor pluggable) analog coherent pluggable optics, the line card allows China Mobile to add optical capacity faster.

Nokia assures to deliver its latest optical transmission innovation to help China Mobile optimize its networks and make new opportunities available for subscribers. This resourceful optical platform is expected to help China Mobile function better – rapidly add optical capacity, fulfill increasing mobile data demand in the cloud era and offering the best speed and quality to the expanding 4G customer base.

Initial Framework Deal

In Jun 2016, Nokia had signed a one-year agreement worth €1.36 billion ($1.5 billion) with China Mobile to provide the operator with infrastructure and equipment for operating a cloud network. As per the deal, Nokia will help China Mobile transit to a flexible cloud network infrastructure with the help of its 5G-ready AirScale Base Station and deliver mobile, fixed, IP routing, optical transport, customer experience management technologies and operational support, global services throughout the year. Presently, the Chinese market is dominated by China Mobile, China Telecom Corp. Ltd. (NYSE:CHA) and China Unicom (Hong Kong) Limited (NYSE:CHU) .

Nokia’s Latest Coverage in China

This month, Nokia signed an agreement with China Telecom to forge ahead with 4G rollout in 19 provinces of China, enabling China Telecom to expand coverage and capacity as well as the quality of service for subscribers. This agreement paves the way for the introduction of 5G technology and lays the foundation for China Telecom's launch of Voice over LTE (VoLTE) services in 2017.

The Bottom Line

Undoubtedly, China has one of the fastest growing technology sectors in the world. However, a downward trend has been observed in the recent months. Reports state that China Mobile recently recorded a 5.6% hike in profits compared to last year due to continued rise in 4G customers. China Mobile had 837.04 million mobile customers in June, 2016 versus 817.2 million a year ago. Out of the total, 4G customer count stood at 428.54 million versus 189.66 million a year ago. China Mobile’s 4G network is expected to gain over 300 million of subscribers, which would make it one of the largest 4G networks in the world.The latest association between China Mobile and Nokia is a crucial win for Nokia as it will help the latter safeguard its leading position as a technology service provider in China.

Both Nokia and China Mobile currently have a Zacks Rank #3 (Hold).