By Parmy Olson
LONDON -- As the U.S. continues its campaign against Huawei
Technologies Co., the Chinese telecom-equipment maker's two biggest
rivals are battling each other to take advantage.
On Wednesday, Nokia Corp. of Finland and Ericsson AB of Sweden
announced they would become the primary providers for Japanese
mobile carrier SoftBank Corp.'s network upgrade to 5G, the latest
generation of super-fast-mobile networks. It isn't the first time a
carrier has snubbed Huawei in favor of its older, nordic
competitors.
Ericsson recently won a contract from a Danish carrier to
replace Huawei equipment as it starts to upgrade its networks to
5G. Ericsson has said it has won 18 such "equipment swap"
contracts, deals to replace a rival's gear with fifth-generation
upgrades.
Nokia said it recently replaced some Huawei gear for Vodafone
Group PLC in Germany. Out of 37 recent deals for 5G gear, it has
won twice as many swaps as Ericsson, according to Nokia. Ericsson
said it didn't recognize those numbers, and wouldn't go into
contract details.
It isn't clear how many of these swaps overall are coming at
Huawei's expense. "We have seen no significant impact on our 5G
sales," a spokesman for Huawei said, referring to U.S. government
allegations that Huawei gear poses a national-security threat. The
spokesman added that Huawei was disappointed to lose Danish telecom
company TDC A/S after supplying the carrier for 12 years.
The latest move by SoftBank is definitely bad news for Huawei,
said Janardan Menon, a sell-side analyst covering Ericsson and
Nokia for Liberum Capital in London. "It is likely to be a result
of the pressure that the U.S. government has been putting on other
countries, including Japan, from early last year."
The U.S. pressure has increased the competition between Ericsson
and Nokia to pick up any business that falls away from the Chinese
giant. Obtaining customers from Huawei -- and each other -- is
crucial in solidifying separate turnaround efforts at Nokia and
Ericsson, the Nos. 2 and 3 telecom-gear makers by sales,
respectively, behind Huawei.
Nokia Chief Executive Rajeev Suri last month referred to the
double-edged nature of the U.S. push against Huawei. "Some
competitors seek to be more commercially aggressive in the early
stages of 5G as some customers reassess their vendors in light of
security concerns," he said after reporting first-quarter sales.
That competition has created "near-term pressure but longer-term
opportunity," he said.
Once on top of the industry, Ericsson and Nokia were hurt over
the past decade by fierce competition from Huawei and smaller
Chinese rivals. Meanwhile, carriers that had gorged on gear to
build 4G -- the mobile-network technology that replaced slower 3G
-- tapered off buying new equipment once their buildouts were
finished.
Now, carriers and internet providers are snapping up equipment
again, this time for 5G.
Ericsson's chief executive, Börje Ekholm, said mobile carriers
had a "great opportunity" to earn money from 5G technology that
would be "as important as roads and railways....We're quickly
moving beyond connecting people to connecting machines and
things."
The global market for providing 2G, 3G, 4G and 5G infrastructure
is worth about $30 billion in annual sales, excluding services, or
37% of the wider, $81 billion mobile-infrastructure market,
according to Dell'Oro, a market-research firm.
The U.S. has used 5G as one of the driving reasons for its steps
against Huawei. Officials say the company could be compelled to use
its equipment or employees to spy on or disable foreign 5G
networks. Huawei says it isn't beholden to Beijing and would never
spy for any government. Washington has asked allies to block Huawei
from their 5G rollouts.
Last month, Huawei reported a big jump in first-quarter revenue,
and said it had signed 40 5G deals around the world. One of those
was with Etisalat Group, the state-controlled telecom carrier in
the United Arab Emirates, a strong U.S. ally.
Analysts are looking at one particular subset of the
telecom-gear industry to gauge any fallout: radio-access
networking, or RAN, which includes much of the gear, including base
stations and antennas, needed for 5G.
Huawei has been growing quickly in the field. Between 2016 and
2019, Huawei's share of RAN sales outside North America rose
between 2 and 3 percentage points, according to Dell'Oro. The
research firm didn't provide detailed numbers but said Huawei's RAN
market share in that region now is more than both Ericsson and
Nokia combined, as the two European companies each slipped about 1
percentage point in the same period.
There is also a new competitor. Samsung Electronics Co. has
quickly raised its market share of the radio-access-networking
market, according to Dell'Oro.
The stakes are high because such big infrastructure rollouts by
carriers come along infrequently, often spaced out over a decade or
more, as providers upgrade to the next generation of wireless
technology. "They bet their companies," said Thomas Noren, head of
5G commercialization at Ericsson.
The U.S. is a particularly fierce battlefield for Ericsson and
Nokia because Huawei has been all but barred from the market since
a 2012 congressional report labeled it a national-security risk.
Last summer, Nokia nabbed a $3.5 billion 5G contract from T-Mobile
US Inc. Earlier this year, U.S. Cellular Corp. gave its 5G business
to Ericsson, without disclosing a value.
Last month, Nokia said it was deferring a chunk of expected 5G
sales in North America until later in the year. It cited
intensifying competition and the "evolving readiness of the 5G
ecosystem."
Nokia's network chief, Tommi Uitoo, said Ericsson was using
"meaningful lower" prices to win business. U.S. Cellular cited
price as a factor in going with Ericsson. So did Italy's Wind Tre
SpA, owned by CK Hutchinson Holdings Ltd., which picked Ericsson
for its 5G rollout in June 2018.
Ericsson played down any price cuts. The company's Mr. Noren
said it wasn't cutting prices but sometimes absorbing the cost of
installing its equipment for a carrier. That has led to thinner
margins, Ericsson has said.
Nokia also reported lower margins in the first quarter, blaming
the new competition. "It's a marathon rather than a sprint," Mr.
Uitoo said.
(END) Dow Jones Newswires
May 29, 2019 11:57 ET (15:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Vodafone (NASDAQ:VOD)
Historical Stock Chart
From Aug 2024 to Sep 2024
Vodafone (NASDAQ:VOD)
Historical Stock Chart
From Sep 2023 to Sep 2024