Verizon is preparing to kick Nokia to the curb and give Samsung roughly half of its radio access network (RAN) contract, Ryan Koontz, senior research analyst at Rosenblatt Securities, told SDxCentral.

The deal will see Verizon go from three RAN vendors to two, including a shocking decision by Verizon to completely rip out and replace all of Nokia’s equipment and services dating back to its 4G LTE network footprint. Ericsson and Samsung will effectively split Verizon’s RAN contract going forward, according to Koontz.

“They’re going to cut bait completely on Nokia — take them to zero,” Koontz said, adding that multiple, high-level sources have confirmed the framework of the deal. He declined to name those sources. “It’s a big deal. This is probably the biggest change in a telecom vendor in a decade.”

Verizon and Samsung declined to comment on Koontz’ prediction. “We are accelerating our 5G deployment and work with a diverse set of partners” and “we work closely with all vendors in our ecosystem on future plans,” a Verizon spokesperson added. A Nokia spokesperson declined to comment on Verizon's vendor strategy, but highlighted its longstanding relationship and said it remains committed to serving the operator.

“They’re going to rip out all of the existing Nokia [equipment], even on 4G, because if you’re doing dynamic spectrum sharing (DSS) you can’t have different vendors with different radios, you’d have to move them to different regions. You’d have to consolidate Nokia regions and build out a new Samsung region,” Koontz added.

Verizon’s market position on 5G is heavily dependent on its ability to use DSS, software that allows operators to use the same spectrum for 4G LTE and 5G on a demand-generated and automated basis. Heidi Hemmer, VP of technology at Verizon, last month told SDxCentral that DSS testing was underway with Ericsson, Nokia, and Samsung and that it was still on track to reach nationwide 5G coverage by the end of this year.

This major change in vendors midstream will likely push Verizon’s 5G timeline back. “Ericsson’s probably good to go, but the change has got to hurt [Verizon’s 5G] rollout plan,” Koontz said.

“Maybe they’ve just got to rip the Band-Aid off and figure, ‘hey, if the other [U.S. operators] are willing to bet on Nokia, we know we’re going to beat you in the long run.’ It’s a long game. It’s not just who gets the service turned up first but who gets the best product and mobile service out there,” he said.

Nokia is a 5G RAN equipment supplier for AT&T and T-Mobile US, but this shakeup will mark the end of Nokia’s business with Verizon.

Samsung, which had about 5% of Verizon’s 4G LTE RAN contract, is slated to earn roughly $1.5 billion in revenue for the next five to seven years from its new deal with Verizon, according to Koontz. “I think built in there is probably some of the cost of replacing the 4G at an incredible discount. It’s a major change and shocking for the industry, and Nokia’s not in any kind of financial shape to handle a big loss like this,” Koontz said.

Koontz is particularly struck by Verizon’s apparent decision to completely rip out and replace all of Nokia’s existing equipment in its network, especially during a major network transformation cycle. “I’ve seen deals ripped out where it’s pushing on nine figures, tens of millions of dollars, but I’ve never seen billions.”

These are decade-long decisions, he added. “You have to live with this vendor for 10 years. And so if you’re Verizon, and you really have questions about Nokia and you’re maybe not happy with the roadmap and the relationship, maybe you just have to pull the Band-Aid off.” 

Samsung is big, viable, and deep pocketed, and it’s “been pretty committed to this business in the U.S. even without getting a lot of volume over the last couple years,” Koontz said. The South Korean based vendor also has the services capability to step up and deploy thousands of people in the field to accomplish the monumental task ahead, he added.

“This will be like a crown jewel. I mean, down the road, look out. … If they win this Verizon business, they could get a halo effect,” he said

While multiple factors certainly weighed on this decision, Nokia’s challenges of late were likely part of that equation. The Finnish vendor’s initial 5G equipment carried high costs that have impacted its profit margin and new hardware running on a new system-on-a-chip (SoC) won’t reach the entirety of its portfolio until the end of 2022. 

Conversely, all of Samsung’s base stations are already running on its modem SoC, Alok Shah, VP of networks strategy at Samsung’s U.S.-based division, told SDxCentral earlier this week. He called it a “critical element” of Samsung’s 5G product suite.

“I’m not aware of what the final straw was that broke the back here,” Koontz said. However, he added this will mark the end of the last American RAN vendor in Verizon, dating back to Lucent, which merged with Alcatel in 2006 and was later acquired by Nokia Siemens Networks in 2016.

“Samsung has really had an eye on this business for years and I don’t think anybody really believed that they could pull it off,” Koontz said. “I’m not convinced they have it 100% nailed down, but it sure sounds like they’re going to win.”