Samsung Gets $6.6 Billion Verizon 5G Contract At Huawei Expense

Trump administration efforts to blacklist Chinese electronics giant Huawei mean good news for Samsung (005930.KS) Electronics: The South Korean company announced a $6.6 billion deal Monday with Verizon (VZ) to help it build its 5G U.S. networks.

Details were not immediately released, with Samsung saying only the deal is for network equipment.

“With this latest long-term strategic contract, we will continue to push the boundaries of 5G innovation to enhance mobile experiences for Verizon’s customers,” Samsung said in a statement.

Samsung already is supplying 4G and 5G equipment to AT&T, Sprint and Verizon, and currently is working to expand its presence in Japan. It launched the world’s first 5G network in South Korea in April 2019 and has since expanded its market share in that country.

Verizon CEO Hans Vestberg told CNBC last year the largest U.S. wireless provider does not use any Huawei equipment.

The administration imposed sanctions on Huawei citing national security concerns, last month banning sales of any chips using U.S. technology to the Chinese firm, damaging both its 5G equipment and handset business.

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

Park Sung-soon, an analyst at Cape Investment and Securities, told CNBC the Verizon contract will help Samsung secure more business.

The Verizon contract runs through 2025.

U.S. pressure has stymied Huawei 5G expansion. The U.K. and India are both phasing out their Huawei equipment, with other countries expected to follow suit or strictly limit Huawei components.

Samsung telecom equipment market share in 2019 was just 3% compared to 28% for Huawei, 16% for Nokia, 14% for Ericsson, 10% for ZTE and 7% for Cisco, the research firm Dell’Oro Group said.

5G is designed for faster download speeds and more capacity and connectivity for connected devices, allowing for the expansion of virtual reality, the Internet of Things and artificial intelligence. Unlike earlier iterations, which operate on single spectrum bands, 5G uses three bands and needs many small cells connected to a low-power base to cover an area.

Carriers currently are piggybacking their 5G networks on their LTE networks as they build out capacity.

Samsung closed higher Monday on the Korean Stock Exchange, up 1.62%.