How Nokia is driving 5G monetization

With more than sixty 4G and 5G private wireless customers in Latin America, Finnish equipment provider Nokia is a major private network player in the region. 

Nokia has 635 private network customers globally, of which 135 use 5G. 

Last year, Latin America was the second fastest-growing market for Nokia in terms of sales. But in 2Q23, the company reported a 16% year-on-year drop in this figure, as mobile network demand cooled. 

BNamericas talks to the company's cloud and network services head, Raghav Sahgal, who recently visited Argentina, where private network development is incipient.

BNamericas: What’s behind the digital ecosystems, monetization and as-a-service models Nokia has identified as key for disruption?

Sahgal: The first is really digitization, a journey that we're pursuing much more on the enterprise side and very specifically around assets, heavy industries, which have a much lower level of digitization. From a global perspective, industries are only 30-40% digitized.

Communication is crucial. Wi-Fi will always be there, but [wireless 4G/5G] private networks will enable different use cases, essential for applications that require more resilience, better service quality. 

This digitization of industries continues in the transport, utilities, energy, manufacturing and agriculture areas, among others. 

Regarding monetization, communication is one use case [for a smartphone] but there are many other ecosystems and different types of applications and you have to become part of this broader value chain to monetize. 

The monetization platform we're building is really to enable our customers, both on the telecoms and enterprise sides, to connect that network into this ecosystem of applications so that every time an application is used, network capability is consumed and monetization occurs.

If you don't participate [in the ecosystem], then you remain a connectivity player and that’s not enough to monetize because building 4G and now 5G infrastructure requires a lot of investment.

BNamericas: Do you see monetization opportunities around public 5G networks?

Sahgal: We divide monetization into three areas: the consumer, enterprise IT and industry.

On the consumer side, augmented and virtual reality and gaming are extremely relevant use cases, but right now the equipment to enjoy that experience is expensive. Also, technology still has to be perfected. So monetization will occur, but not until the cost of those headsets and the experience become better, which will take until 2026-27.

In industry, digitization is low. There's a desire and 5G offers very interesting vectors that can be monetized: presence, information, quality of service, and so on. We've identified 16 levels of [network] capabilities that can be consumed.

Industries will be the first to consume [capabilities] because they’re needed for those sensitive machines and things that can't run over Wi-Fi. It has to be 5G because it's more reliable. I think that's the first place where monetization will occur.

In the enterprise area, it’s collaboration. It’s going to evolve into new ways of collaborating where one can be in a meeting through an avatar, but not physically. These use cases will be built and we believe that’s another area where 5G capabilities are needed. Monetization on the enterprise side will occur more in 2024-26. 

BNamericas: Could private networks overtake public ones as telcos’ biggest revenue generators?

Sahgal: 4G/5G revenue is still quite substantial, but in some cases the market is flat, in some cases it’s growing. India is growing fast because it still doesn't have adequate coverage. On the consumer side, growth is pretty much flat, maybe 1% or 2%.

Enterprise is going to fuel more 4G and 5G revenues. According to a Bell Labs study looking at global coverage, there are 7-8mn stations. For enterprise, 14mn are needed. It’s a significant opportunity.

We believe the enterprise and industry areas are great places for continued growth and will provide faster growth because of the digitization that’s needed.

And by the way, telecom operators have a big role to play because it's them and us working together to pursue that market with other players.

BNamericas: Coverage in the enterprise and consumer segments is sorely lacking in Latin America.

Sahgal: Coverage is always a challenge in developing markets. But that's one reason why a mine or a port without adequate coverage is setting up private networks. They can't rely on the macro network.

BNamericas: What’s your view on digitization in Latin America? 

Sahgal: The success we’ve seen with private networks and industry is remarkable. We now have over 60 private network clients in the mining, port, agriculture and other sectors. 

We've got a proven model in Latin America and it's working with our telecommunication partners. In fact, we’re looking to replicate it elsewhere.

In a developing market, resource and financial pressures are high, so constant optimization while digitizing is key. That creates a unique situation in Latin America, where implementing private networks, building capabilities and coexistence with Wi-Fi is a strategy because it’s possible to run a 4G or 5G network more efficiently and provide better coverage, and that increases productivity and lowers costs. 

Resource and financial constraints require driving innovation, but at lower cost, and this is where I think collaboration among operators and us [is beneficial]. 

We’ve done a lot in Chile, Colombia, Brazil and Mexico and are starting in Argentina. I think this model provides an excellent way to drive digitization at the right cost.

I think Latin America has a unique opportunity because it doesn’t have as many legacy networks. A lot of this coverage is new. 

BNamericas: What role will the metaverse and artificial intelligence play in the communications service provider ecosystem?

Sahgal: AI and machine learning are buzzwords, but they’ve been around for a long time. It’s just accelerated because generative AI has become popular and grown quickly. 

Adoption rates are high but there’s a moral question, which is ‘can this also hurt us?’ Nokia is doing responsible AI, using it as we engineer products. 

We absolutely believe and we're investing heavily in making sure that AI and machine learning are in every facet of our business, from product development to application development to how we care for our customers – but in a responsible way. 

And as is obvious looking at our customers, the amounts of data produced through 5G are massive and growing so quickly, it is impossible for humans to process. That’s where AI and machine learning can help. If we don't use AI and machine learning, 4G and 5G networks will be difficult to manage.

Other benefits for [service providers] relate to enabling better understanding of customers and the market.

So, we’ll see two levels of adoption. One is companies like us that are providing technology, but operators are also investing and driving specific AI and machine learning use cases. 

One unique thing we're doing is that we're launching these analytics technologies under the software-as-a-service model, which delivers innovation faster to customers.

In the telecom sector, we’ve been a little slow to adopt it, but Nokia is leading and making sure that software-as-a-service is delivering capabilities and innovation. 

BNamericas: Are you using your own datacenters or public cloud for those offers?

Sahgal: It has to be delivered where it’s being consumed. At the end of the day, customers rely on our datacenters, but our units will also host hyperscalers because we consume that infrastructure as well. 

BNamericas: What’s the outlook for digital twins technology?

Sahgal: Digital twins technology is probably the leading use case, especially in the industry because managing an airport or a manufacturing plant, a digital twin [digitally replicating these structures] is a very good way of designing and maintaining new capabilities. 

That's probably the number one use case we are driving for industrial applications and ports and other areas are using our digital twins technology.