June 8, 2020

Ericsson lays claims to Huawei territory with China 5G contracts

By Lucy Ingham

Swedish telecoms giant Ericsson has achieved a key win in the ongoing 5G rollout by netting contracts from key companies in China, alongside Chinese rival Huawei.

Ericsson has been awarded 5G contracts from “all three major operators in China”, referring to China Telecom, China Mobile and China Unicom, the only telecoms operators in the country.

The contracts will see Ericsson supply base station hardware and software to China, which is currently the world’s largest 5G market, as the country further rolls out its networks.

In the case of the China Mobile contract, Ericsson will be responsible for 11.5% of the contract, making it the only non-Chinese company to take a share of the work. Huawei took the lion’s share, with 57.2%, while ZTE took 28.7% and CICT 2.6%. Finland’s Nokia also made an unsuccessful bid on the contract.

In the case of the China Telecom and China Unicom contracts, Ericsson will deploy both hardware, in the form of its Ericsson Radio System products, and Ericsson Spectrum Sharing, which helps 5G to be rapidly deployed in areas with 4G. It will also provide software to manage and virtualise 5G.

Ericsson China 5G wins see realisation of long-term goals

The contracts see the realisation of a long-term campaign to access the Chinese 5G market by Ericsson, which has been making moves into China for several years.

“China will be one of the first markets in the world to deploy 5G. It’s going to be the first to do it on scale and it will most likely be the first with a standalone 5G network,” said Börje Ekholm, CEO of Ericsson, in a call with investors in January 2019.

“We are investing heavily to make sure that we are a technology participant in that evolution of their network. It’s an important market for us and we continue to be there.”

It is an impressive achievement for Ericsson, given that they are the only non-Chinese company to gain such a significant place within China’s 5G market, giving them further credibility as a viable challenger to Huawei, which is often seen as the superior provider of cost-effective 5G technologies.

It is also likely to prove highly profitable to Ericsson, which today gave an update to financials warning that although the contracts would require initial upfront costs that would see second quarter margins in the negative, it was “expected to have healthy profitability over the life of the contracts”.

Ericsson will announce its second quarter 2020 results on 17 July.


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