Nokia has signed a €500m loan with the European Investment Bank as authorities on the continent look to support some of their rare large technology companies against Chinese rivals in the race to dominate 5G mobile networks. Months after supporting Sweden’s Ericsson in the same technology, the EIB is now giving Nokia a five-year loan to help its research and development efforts in 5G.
“Europe needs to be involved in the race for 5G,” Alexander Stubb, EIB vice-president and former Finnish prime minister, told the Financial Times. “We have to understand that our competitors are huge and the likes of Huawei and China Mobile. This is where we need to wake up and smell the coffee and get connected.”
Spending on 5G networks by telecoms operators is starting this year, and Nokia and Ericsson are benefiting from their Chinese rivals’ near-absence from the US, where much of the early investment is taking place. “This loan helps with both research in 5G and develop momentum in customer wins. The EIB supports our view that 5G is happening now, earlier than expected,” Rajeev Suri, Nokia’s chief executive, said in a separate interview. Nokia will use the loan to push its vision of “end-to-end” 5G involving not just mobile networks, but all the computing, software and services that go with them.
The Finnish group expects the US to be followed by South Korea, with Japan and China joining in at the start of next year. Mr Suri said the first wave would bring a better experience for consumers, with faster internet speeds, while industrial applications and uses such as virtual and augmented reality would follow. 5G was likely to be more important for businesses than consumers because of potential applications such as remote surgery, driverless cars and better automation in factories, according to Mr Stubb.
“We feel the situation is similar to the early 1990s, when Europe raced ahead of the US and much of the rest of the world through GSM [2nd generation mobile technology]. Then the rest of the world caught up and then surpassed us with 4G. Now we need to show that our flagship companies are able to compete, not just in Europe but in a broader sense,” he added.
The EIB believes that the loan could generate further investments of up to €1.5bn among smaller and medium-sized companies and should help Nokia in countries including France, Finland, Poland and Germany. The loan uses money from the European Fund for Strategic Investments, the main part of the so-called Juncker Plan, after European Commission president Jean-Claude Juncker’s idea to help the EIB invest in riskier projects without jeopardising its top credit rating. “These are flagship loans for flagship companies,” Mr Stubb said. Ericsson announced this month that it would hire more workers and open a R&D centre in the US as part of its push into 5G.