Nokia and Ericsson are competing to gain the greatest advantage of the U.S. ban on Huawei technologies. Both rivals stated they would be “primary providers” for SoftBank Group’s mobile network upgrade to 5G. Ericsson was awarded a contract from a Danish network to replace Huawei gear in an upgrade to 5G; the company stated it had won 18 similar contracts. Nokia said it replaced Huawei gear for Germany’s Vodafone Group; with 37 recent “equipment swap” deals, the Finnish company tops Swedish-based Ericsson.
The Wall Street Journal reports that “it isn’t clear how many of these swaps overall are coming at Huawei’s expense.” A Huawei spokesperson stated that it has seen “no significant impact on our 5G sales,” although it was “disappointed to lose the Danish carrier, TDC A/S, after supplying the telecom company for 12 years.”
But Liberum Capital sell-side analyst Janardan Menon noted that TDC A/S’s move 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.”
Nokia chief executive Rajeev Suri stated that the competition with Ericsson has created “near-term pressure but longer-term opportunity,” especially given that both companies were “hurt over the past decade by fierce competition from Huawei and smaller Chinese rivals.” With 5G upgrades looming, said Ericsson’s chief executive, Börje Ekholm, mobile providers have a “great opportunity” to earn money from 5G technology.
“We’re quickly moving beyond connecting people to connecting machines and things,” he said.
Market researcher Dell’Oro Group stated that “the global market for providing 2G, 3G, 4G and 5G infrastructure is valued at roughly $30 billion in annual sales, excluding services, or 37 percent of the wider, $81 billion mobile-infrastructure market.” Dell’Oro added that Samsung is a relatively new competitor in the field.
Competition is particularly fierce in the U.S. due to the fact that Huawei gear has been banned. Nokia won a $3.5 billion 5G contract from T-Mobile, and Ericsson inked a 5G contract for an undisclosed amount with U.S. Cellular. Nokia network chief Tommi Uitoo claimed Ericsson was offering “meaningful lower” prices to gain contracts; U.S. Cellular cited price as a factor in its deal with Ericsson, as did Italy’s Wind Tre SpA, owned by CK Hutchinson Holdings. Both Nokia and Ericsson stated that lower margins are the result of the competition.
Meanwhile, Huawei “reported a jump in first-quarter revenue” having inked 40 worldwide 5G deals. One is with Etisalat Group, the state-controlled United Arab Emirates telecom carrier. Dell’Oro said that, between 2016 and 2019, Huawei’s share of relevant 5G gear outside North America “rose between 2 and 3 percentage points.” Ericsson and Nokia “each slipped about 1 percentage point in the same period.”