Nokia: T-Mobile, Sprint Breakup A Big Win

Nokia: T-Mobile, Sprint Breakup A Big Win
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Things still look good for Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), according to Credit Suisse analysts. They believe the company will benefit from Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) staying separate. They also believe that Nokia’s ability to license its patent portfolio won’t be affected much by Apple Inc. (NASDAQ:AAPL)’s patent settlement with Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930).

Nokia to benefit from greater capital expenditures

In a report dated Aug. 6, 2014, analysts Kulbinder Garcha, Achal Sultania and Ray Bao weighed in on recent news in the telecommunications industry and how it could affect Nokia. They maintained their Outperform rating and target price of €7 per share on Nokia.

The Credit Suisse analysts said capital expenditures could pick up if the merger between Sprint and T-Mobile really doesn’t happen. They said this view also assumes that both companies deliver on their guidance for capital expenditures in the current fiscal year. The guidance from both companies suggests that there will be a strong ramp in spending in the second half of the year. Sprint’s spending is expected to rise 75% half over half, while T-Mobile’s is projected to rise 36% in the same time frame.

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They note that Nokia, as well as competitor Ericsson (ADR) (NASDAQ:ERIC), is one of T-Mobile U.S.’s key suppliers. In addition, Nokia is working with Sprint on the rollout of its Project Spark. As a result, they say keeping the companies apart should be good news for Nokia Siemens Network’s top line.

Apple, Samsung agreement won’t affect Nokia’s patents

This week it was also announced that Apple and Samsung are finally ending their patent disputes in all markets outside the U.S. The companies did not disclose the terms of that agreement, but the Credit Suisse team says it doesn’t involve a licensing agreement. As a result, they say it should not affect Nokia’s ability to license its intellectual property. They still expect the company to grow its run rate from €600 million this year to €1.4 billion by 2017 for several reasons.

For example, they say most of Apple’s and Samsung’s disputes outside the U.S. were related to phone design, which is a lot harder to prove. Nokia’s patents, however, mostly deal with 2G, 3G and 4G standards, which are much easier to protect. In addition, they say the company no longer has to deal with the challenges associated with protecting patents while also running a handset business. And third, they say the settlement shows that both Apple and Samsung are willing to settle ongoing lawsuits with other parties as well.

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