Nokia's Cloud-Native 5G Voice Core Expansion in Australia: Strategic Positioning in the 5G Infrastructure Transition and Its Impact on Margins and Market Share

Nokia's strategic pivot toward cloud-native 5G infrastructure is reshaping its competitive position in the Australian telecommunications market. With a series of high-profile partnerships in 2025, including long-term contracts with Optus and 2degrees, the Finnish tech giant is capitalizing on the global shift to cloud-native architectures. These deals are not only expanding Nokia's market share in the Oceania region but also driving operational efficiencies and margin improvements that position it as a leader in the 5G voice core sector.

Strategic Partnerships and Market Capture

Nokia's Cloud Native Communication Suite (CNCS) has emerged as a cornerstone of its 5G strategy. In Australia, the company secured a critical contract with Optus, the country's second-largest telecom operator, to modernize its Voice Platform (IMS) with cloud-native voice services. This partnership marks a strategic shift for Optus, which is moving away from traditional vendors like Ericsson to adopt Nokia's CNCS, deployed on a hybrid cloud solution powered by Red Hat OpenShift. The CNCS is designed to streamline network operations, reduce manual interventions, and enhance energy efficiency by up to 20% compared to legacy systems.

In New Zealand, Nokia extended its collaboration with 2degrees, a leading telecom provider, through a six-year deal to deploy CNCS on the Nokia Cloud Platform. This integration of Red Hat OpenShift and Red Hat's broader cloud ecosystem allows 2degrees to consolidate multiple 3GPP voice functionalities into a single cloud-native network function, reducing infrastructure costs and accelerating time-to-market for new services. The inclusion of Nokia's MantaRay Network Management solution further strengthens 2degrees' ability to monitor and optimize its network.

These partnerships underscore Nokia's ability to outmaneuver competitors like Ericsson in a market traditionally dominated by proprietary, hardware-heavy solutions. By leveraging open, flexible cloud-native architectures, Nokia is addressing the demand for scalable, cost-effective 5G infrastructure that aligns with operators' sustainability goals.

Financial and Operational Impact

The financial implications of these contracts are significant. Nokia's Cloud and Network Services segment reported a 14% year-over-year revenue growth in Q2 2025 (€557 million), driven by cloud-native deployments. While exact revenue figures for the Optus and 2degrees deals remain undisclosed, the segment's operating income turned positive at €9 million, a stark contrast to the €35 million loss in the same period in 2024. This turnaround reflects improved margins from cloud-native solutions, which reduce hardware costs and energy consumption.

Nokia's CNCS platform is particularly impactful in markets like Australia, where operators are under pressure to deliver 5G services while managing rising energy costs. The 10–20% energy efficiency gains from CNCS compared to traditional IMS systems not only lower operational expenses for operators but also enhance Nokia's value proposition in a carbon-conscious industry.

Competitive Positioning and Market Share Growth

Nokia's dominance in the 5G Standalone (SA) Core market further solidifies its strategic position. As of 2024, the company held 55% of live 5G SA deployments globally and served 123 5G SA Core customers—the highest in the industry. This leadership is critical in Australia, where 5G SA adoption is accelerating due to demand for low-latency applications in industries like manufacturing and smart cities.

Ericsson, Nokia's primary rival in the 5G space, has struggled to match Nokia's cloud-native agility. While Ericsson has secured contracts in India and the Middle East, its reliance on in-house cloud infrastructure has drawn criticism for inflexibility compared to Nokia's Red Hat-powered CNCS. In Australia, Optus' shift to Nokia signals a broader industry trend toward open, interoperable solutions that reduce vendor lock-in and operational complexity.

Investment Implications

For investors, Nokia's expansion in Australia and New Zealand represents a high-conviction opportunity. The company's cloud-native strategy is not only capturing market share but also driving margin expansion through cost efficiencies. With the global 5G SA core market projected to grow from $10.52 billion in 2025 to $105.06 billion by 2029, Nokia is well-positioned to outperform peers in a sector expected to compound at a 41.7% annual rate.

Key metrics to monitor include Nokia's Operating Margin in the Cloud and Network Services segment, Revenue Growth from CNCS deployments, and Customer Acquisition Costs in the Oceania region. A rising operating margin would signal successful cost optimization, while sustained revenue growth would validate the scalability of its cloud-native model.

Conclusion

Nokia's cloud-native 5G voice core expansion in Australia is a masterclass in strategic positioning. By aligning with Red Hat's open cloud ecosystem and securing long-term partnerships with Optus and 2degrees, the company is redefining the 5G infrastructure landscape. For investors, this represents a compelling case to bet on Nokia's ability to drive margin growth and market share expansion in a sector poised for explosive growth. As the world transitions to cloud-native networks, Nokia's early-mover advantage in Australia and New Zealand could translate into outsized returns for long-term holders.