Sweden’s Ericsson is getting ready to face new US-backed telecoms gear challengers

The prospect of a new rival could be a blow to Ericsson, which has made a successful turnaround under CEO Borje Ekholm
The US government’s global campaign against Huawei opened the opportunity for Ericsson and Nokia to expand in Western markets

Bloomberg

Published: 5:31pm, 23 Feb 2021

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Swedish telecommunications equipment giant Ericsson says the virtual duopoly it is enjoying in some Western markets since the exclusion of Huawei Technologies Co will not last forever.

Ericsson and Finland’s Nokia are thriving in markets, including the US and the UK, since their powerful Chinese competitor was barred from 5G wireless supply deals worth tens of billions of dollars.

The US government, whose global campaign against Huawei opened that opportunity for the two Nordic vendors, will probably create new competitors, according to Ericsson chief executive Borje Ekholm.

“We understand the need for more vendor choice, and it is likely that there will be something with an American component,” Ekholm said in an interview.

A woman walks past telecommunications equipment maker Ericsson’s headquarters in Stockholm, Sweden. Photo: Agence France-Presse

The executive said he needs to be prepared for new rivals to emerge, given the known ambitions of mobile network operators and governments seeking to boost home-grown alternatives.

The sidelining of Huawei – over fears that China’s government may infiltrate its equipment to spy on Western governments and businesses – underscored the risks of relying on only a handful of suppliers of critical telecoms infrastructure.

Smaller players such as South Korea’s Samsung Electronics still lack the scale to compete globally, so mobile network operators and governments are now eager to find alternatives.

Former US Attorney General William Barr has even suggested that the US consider investing in Nokia and Ericsson. Ekholm said speculation about US interest in the Swedish company is likely to continue.

A drone flies alongside engineers as they equip a Swisscom network mast with Ericsson’s 5G base stations in Hindelbank, Switzerland, on December 18, 2019. Photo: Bloomberg

The prospect of a new rival could be a blow to a company that has made a successful turnaround under Ekholm and is riding high, with Huawei under pressure and Nokia suffering from missteps in the early stages of 5G network development.

Since Ekholm took over as chief executive in early 2017, Ericsson has gained a bigger share of all its major markets and the company’s shares have more than doubled. At the end of 2020, it commanded 35 per cent to 40 per cent of the market for radio access network (RAN) equipment outside China, according to research firm Dell’Oro.

One way the US might try to gain a stronger presence in the telecoms infrastructure business is by promoting so-called “Open RAN” technologies that would allow mobile network operators greater choice by combining hardware and software from various vendors.

Open RAN is gaining support from mobile network carriers as well as governments, with Germany reportedly planning to plough as much as 2 billion euros (US$2.4 billion) into its development.

Profile: CEO Borje Ekholm wants to put the record straight on Ericsson’s 5G efforts

Ekholm said Open RAN is still years away from being a real option for network upgrades and, anyway, Europe may end up scoring an own-goal if it bets on the technology.

“A commitment to more open networks is a fine aspiration,” he said. “But as it looks right now, given that Open RAN is mostly dominated by non-European companies, it may be a way to develop a US vendor.”

The executive would rather see Europe focus on helping his customers – mobile network operators such as Deutsche Telekom, Vodafone Group and Orange – by allowing more consolidation and supporting their 5G ambitions using money from the European Union’s 750-billion euro recovery fund.

“That would obviously support our sales, but as a European, I also see that it would boost GDP,” Ekholm said. “We need to invest in digital infrastructure and the guys that are supposed to invest aren’t making an attractive return on capital.”

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