Amazon, Telefonica's Bold Venture To Transform Telecommunications - What's On The Cards?

Telefonica S.A. TEF announced that O2 Telefónica launched a new 5G core network built entirely in the cloud, using technologies from European network equipment provider Nokia Corporation NOK and from Amazon.com Inc’s AMZN Amazon Web Services (AWS).

The 5G Cloud Core will be designed for a capacity of up to 1 million customers in the first phase.

Selected O2 Telefónica customers will benefit from the advantages of the cloud, which include, among other things, higher availability and reliability as well as faster software updates.

O2 Telefónica is the first telecommunications provider with an existing network to operate its core network on AWS.

This initiative underscores Amazon’s ambitious foray into global telecommunications, according to a report from Reuters.

While several telecom networks have migrated peripheral operations to public clouds, Telefonica’s move sets a new precedent as the first existing mobile operator to transition its core network to a public cloud, signaling a shift in industry norms.

The report noted that major cloud-computing giants like Amazon and Microsoft Corp MSFT have long sought entry into the telecom sector, eyeing substantial revenue opportunities. 

However, skepticism among operators regarding the efficacy of public clouds in managing mobile networks has been a barrier.

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Mallik Rao, Chief Technology & Information Officer at O2 Telefonica, articulated a forward-looking strategy, expressing a desire to assess the cloud’s performance over several quarters and aiming to migrate a significant portion of the customer base by 2025-2026.

Transitioning the core network to a public cloud is expected to streamline operations, reduce costs, enhance scalability, and facilitate seamless repairs without service disruptions, thereby bolstering efficiency and reliability.

U.S.-based Dish notably adopted AWS cloud for its core network in 2021, a move facilitated by its greenfield approach, in contrast to existing operators with established systems, the report mentioned.

The telecom cloud market, poised for exponential growth, is projected to surge to $108.7 billion by 2030, presenting lucrative opportunities for industry players like Amazon.

Amazon stock has gained more than 78% in the last 12 months. Investors can gain exposure to the stock via Consumer Discretionary Select Sector SPDR Fund XLY and Vanguard Consumer Discretionary ETF VCR.

Read Next: Amazon To Invest $9B In Singapore Cloud Infrastructure, Doubling Its Current Investment

Price Action: AMZN shares closed higher by 0.03% at $188.76 on Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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