Samsung seals $6.6-billion 5G deal with Verizon as Trump targets Huawei

Samsung Electronics has clinched a $6.6-billion deal with Verizon Communications to help it build 5G networks in the U.S., highlighting how the technology group can benefit from the Trump administration’s targeting of China’s Huawei.

The South Korean company said Monday it had signed a contract to supply wireless telecom equipment to the U.S. operator until the end of 2025. The components will be used for Verizon’s 5G telecom services, according to people familiar with the matter.

The deal comes as the U.S. increases sanctions on Huawei. Washington last month banned sales of any chips using U.S. technology to the Chinese company, hitting Huawei’s 5G equipment and handset businesses.

“More companies will be turning to Samsung for their 5G equipment because of the U.S. restrictions against Huawei and Nokia’s quality issues,” said Kim Young-woo, an analyst at SK Securities. “There are not many alternatives other than Samsung and Ericsson if you rule out Huawei and Nokia.”

Kim expects Samsung to expand its global 5G market share by winning more deals in the U.S., Europe and Middle East as it takes advantage of Huawei’s woes.

Huawei has struggled to roll out its 5G networks globally as Washington has pressed other countries to follow its lead in freezing out the Chinese company. Under growing U.S. pressure, countries including Britain and India are phasing out Huawei equipment from their 5G infrastructure.

Samsung has a relatively small global presence in the telecom equipment market with a 3% share in 2019, according to research firm Dell’Oro Group. That compares with Huawei’s 28%, Nokia’s 16% and Ericsson’s 14%.

The South Korean company has invested heavily in research and development as global telecom equipment makers compete for dominance in 5G. Samsung believes 5G is an important future growth driver as the global smartphone market — one of its biggest revenue streams — stalls.

The group’s network business has taken on added importance as the coronavirus outbreak has hit global demand for its devices. Samsung has made a series of recent acquisitions to boost its 5G presence and has said it plans to increase its market share to 20% by the end of this year.

Samsung has supplied 4G and 5G network equipment to U.S. operators — including AT&T, Sprint and Verizon — and is working with Japan’s NTT DoCoMo and KDDI to develop 5G business models. It has increased its market share in South Korea, which launched the world’s first 5G mobile service in April 2019.

Samsung shares rose 1.6% on Monday in Seoul.

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