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    A005930   KR7005930003

SAMSUNG ELECTRONICS CO., LTD.

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Samsung works its way into European 5G race to fill Huawei gap

12/17/2020 | 10:14am EST
IFA consumer tech fair in Berlin

MADRID/STOCKHOLM/PARIS (Reuters) - European mobile operators are starting to consider Samsung Electronics, long seen as a non-starter, in the race to replace China's Huawei as the supplier of their fledgling 5G systems, although early talks suggest it will still be an uphill struggle.

After Samsung unexpectedly landed a $6 billion deal with U.S. giant Verizon in September, Spain's Telefonica and France's Orange have both held talks with the South Korean firm, company executives say.

Huawei's hardware makes up nearly half of the European 4G network that will form the foundation for super-fast 5G, alongside that of Nokia and Ericsson.

But European operators are under pressure from the United States to shun the Chinese giant for 5G systems that could in future be supporting services ranging from telemedicine to factory automation. Washington says there is a risk Huawei could spy for Beijing, though the firm has repeatedly denied this.

One problem for Samsung is that operators worry that its products will not be compatible with the existing 4G networks built by Huawei, and that it will cost hundreds of millions to rip these out and replace them rather than simply upgrade them.

"They need to be extremely competitive," said Telefonica Chief Technology Officer Enrique Blanco. "The cost of swapping the 4G is an extra cost for Samsung so, even if you are inviting them, it is difficult for them to be competitive."

A Samsung spokesman said the idea that its equipment was not compatible with existing infrastructure was a misconception, but did not provide technical details. He declined to specify which European markets it was trying to enter, but said it hoped to replicate inroads it had made in Asia and the Americas.

Verizon is using Samsung for various parts of its vast U.S. network. "We had done some trials with them and given them a few markets to see how they would work and, and then it worked well," Verizon's Chief Product Development Officer Nicola Palmer told Reuters.

IF NOT HUAWEI, WHO?

Orange Chief Technology and Innovation Officer Michael Trabbia said he, too, was considering Samsung in Europe.

The two European countries where Orange has not yet chosen an equipment maker are Poland and Romania.

"We can see that Samsung is becoming more and more credible on 4G and 5G," Trabbia said. But he said Orange had tested both Samsung and Huawei equipment before opting for Nokia and Ericsson for its 5G systems in France.

European operators have already spent billions of euros to roll out fibre optic networks in Europe, and 5G will drain their pockets even more. The industry body GSMA expects $1.14 trillion to be invested globally over five years, 78% of it on 5G.

If a supplier's products need to be swapped out, it can be pricey. When Bell Canada decided to drop Huawei https://www.reuters.com/article/telecoms-5g-ericsson-idUSL4N2DG2GE this year, analysts estimated the cost of replacing its 4G equipment at about $200 million over several years.

Altice Europe's French telecoms business SFR also says it requires its new 5G equipment to fit the existing structure.

A source close to the company said Samsung was "not there yet", but could be an option in the future.

Europe's biggest mobile operator, Deutsche Telekom, remains sceptical whether Samsung can be competitive in the short term, according to company sources and internal briefing documents.

Analysts too say it will need to do more to compete with Nokia and Ericsson on their home turf.

"If they get a deal from Deutsche Telekom or Telefonica, they need a big organisation to build and support the infrastructure," said Kimmo Stenvall, an analyst at OP Markets Helsinki. "They can't just send their offers to European operators and then start building networks here."

Samsung's spokesman said it had a strong Networks team and research facilities in Europe. But Stenvall said big deals usually presuppose years of groundwork in forming relationships with operators and testing networks.

"We operators cannot be suffering," said Telefonica's Blanco. "We need to be maintaining capabilities."

(Reporting by Isla Binnie, Supantha Mukherjee and Mathieu Rosemain; Additional reporting by Douglas Busvine; Editing by Jonathan Weber)

By Isla Binnie, Supantha Mukherjee and Mathieu Rosemain


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
DEUTSCHE TELEKOM AG -1.43% 16.086 Delayed Quote.-1.31%
ERICSSON -1.83% 102.88 Delayed Quote.3.10%
NOKIA OYJ -1.75% 5.04 Delayed Quote.-9.58%
ORANGE -0.19% 9.897 Real-time Quote.5.14%
SAMSUNG ELECTRONICS CO., LTD. -1.18% 75600 End-of-day quote.-3.45%
TELEFÓNICA, S.A. -0.24% 4.0035 Delayed Quote.3.93%
VERIZON COMMUNICATIONS -0.45% 53.16 Delayed Quote.2.31%
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Financials
Sales 2021 278 689 B 234 B 234 B
Net income 2021 39 330 B 33,0 B 33,0 B
Net cash 2021 108 525 B 90,9 B 90,9 B
P/E ratio 2021 12,7x
Yield 2021 1,92%
Capitalization 508 177 B 427 B 426 B
EV / Sales 2021 1,43x
EV / Sales 2022 1,24x
Nbr of Employees -
Free-Float 82,7%
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Samsung Electronics Co., Ltd. Technical Analysis Chart | A005930 | KR7005930003 | MarketScreener
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Mean consensus BUY
Number of Analysts 40
Last Close Price 75 600,00 KRW
Average target price 101 307,69 KRW
Spread / Average Target 34,0%
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Managers and Directors
Hyun-Suk Kim Co-President, Co-CEO & Director
Dongjin Koh Co-President, Co-CEO & Director
Kinam Kim President, Co-CEO & Director
Tae Moon Roh Co-President & Head-Research & Development
Hee-Chan Roh Chief Financial Officer
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