Telefonica (TEF) recently signed a 5G network usage contract with Nokia and Ericsson, as reported by Reuters. Per the contract, Telefonica’s Spanish 5G network’s frequency bands 3.5GHz and 700MHz will be used simultaneously and equally by Nokia and Ericsson until 2026.
Last month, the company had adopted a multi-vendor strategy by collaborating with Nokia and Ericsson to establish a 5G infrastructure. (See Telefonica stock chart on TipRanks)
Joaquin Mata, head of Operations and Network, Telefonica, said, “It’s a long-term contract, which is the most appropriate scenario for Telefonica as it maintains 4G providers in place and gives us stability to roll out and develop 5G.”
He added, “In 5G, all the providers have demonstrated they’re supremely prepared… and we feel very comfortable having the best technological partners.”
Telefonica’s association with Ericsson and Nokia is long-documented. The companies had earlier partnered for the deployment of 2G, 3G, and 4G networks across the country.
Last month, following Telefonica’s divestment of Telxius’ mobile phone masts in Europe as a step toward debt trimming, Berenberg Bank analyst Carl Murdock Smith upgraded Telefonica to Buy from Hold, while raising the price target to EUR 4.8 ($6) from EUR 4.2, implying a 28.8% upside potential to current levels.
Smith believes that Telefonica shares are currently “over hated,” reflecting the pessimistic outlook of the consensus about the company’s core Spanish operations. He points out that Telefonica’s leverage has lowered, and its issue of more Latin American debt has significantly resolved its currency mismatch.
Consensus among analysts is a Moderate Buy based on 2 Buys and 1 Hold. The average Telefonica price target of $5.68 implies 29.1% upside potential to current levels.
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