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January 13, 2010
Telia Company lit a fire under the LTE infrastructure market today by announcing its vendor selection for nationwide network rollouts in Sweden and Norway, and sticking with only one of its two initial suppliers.
The Scandinavian carrier chose Ericsson AB (Nasdaq: ERIC) and Huawei Technologies Co. Ltd. last year to build initial metro networks in Stockholm and Oslo, which were switched on for commercial service in December 2009. (See TeliaSonera Prices First LTE Offer, TeliaSonera First to Go Live With LTE, and TeliaSonera: We'll Do 4G in 2010.)
But for its widespread LTE rollouts -- 25 municipalities in Sweden and four in Norway -- it has dropped the Chinese vendor, choosing Ericsson for the next-generation packet core, and a combination of Ericsson and Nokia Networks for the access infrastructure, supporting software, and associated network rollout and professional services.
Ericsson and Nokia Siemens Networks (NSN) "have been able to provide high-quality technology and competitive offers," stated TeliaSonera's CTO of mobility services, Lars Klasson, who talked about the carrier's early plans for LTE in a video interview last year. (See Lars Klasson, CTO & VP of TeliaSonera Mobility.)
No financial details of the contracts were available, but a TeliaSonera spokesperson told Light Reading that, while it has been "happy with Huawei as a supplier, and we had a successful cooperation... at the final evaluation for continued rollout, Ericsson and NSN could offer better commercial terms."
The carrier says it will spend around 500 million Swedish Kronor (US$71.3 million) (less than 10 percent of its total capital expenditures) on its LTE rollouts in 2010. After that, investment levels will depend on "availability of customer demands, licences, and market conditions." TeliaSonera also notes that the different mobile technologies (2G, 3G, LTE) are "becoming more and more transparent, flexible, and standardized, and work on multi-frequency bands... The division between the technologies is becoming less important."
As for Huawei, it will complete the city rollout (core and access network) in Oslo, but then not be involved in the wide-area rollout in Norway and Sweden during 2010 and 2011, the period covered by today's announcement.
TeliaSonera's selection is significant, as the rest of the carrier community will be watching closely to see which vendors are selected by the early LTE adopters, and TeliaSonera is arguably the most progressive LTE service provider in the world currently, though others are not far behind. (See When Will Verizon Launch LTE in 2010? and APAC Operators Commit to LTE.)
In addition, competition amongst the mobile infrastructure vendors is intense as they seek to gain LTE "thought leadership" and pin down commercial reference accounts that can help win business elsewhere. (See LTE Core Action Heats Up and Vendors Vie for LTE Limelight.)
Boost for Nokia Siemens
TeliaSonera's decision will come as a blow to Huawei, but it's a massive boost for NSN. The joint venture has been involved in other LTE selections, but not, until now, on this scale. (See Spradley: Nokia Siemens Will Be an LTE Leader.)
NSN is supplying its Flexi Multiradio access platform, its NetAct management software, and associated integration and professional services.
The vendor stressed recently that it intends to extend its market share in key industry sectors, even if that means becoming more aggressive on pricing. With TeliaSonera noting that NSN has been able to offer "better commercial terms" than Huawei, which is well known for pitching its wares at below market rates, it seems such pricing tactics may have come into play here. (See NSN Targets Greater Market Share and Nokia Siemens Revamps, Cuts Jobs.)
Certainly Heavy Reading senior analyst Gabriel Brown, a mobile sector specialist with in-depth knowledge of the LTE market, believes that's likely to have been a contributing factor to NSN's success, which he says is "very positive" for the vendor. (See 3G Fuels Mobile Packet Core.)
He notes that NSN's determination to improve its "deal flow" will have made it more competitive in terms of pricing. And the analyst has no doubts that TeliaSonera will have used Huawei's initial involvement in its LTE plans, and the possibility that further commercial business could have been awarded to the Chinese vendor, as one of its bargaining tools.
But Brown believes other factors will have come into play as well. He says the major carriers "need a wide diversity of suppliers and need to keep the market competitive. It's in TeliaSonera's interest to support all the key players -- none of the operators wants to see the market shrink to just a few capable vendors."
He adds, though, that NSN is still the No. 2 player globally in the mobile infrastructure market, behind Ericsson.
Minor setback for Huawei
For Huawei, this is a setback, as it will have felt confident of landing further LTE business with TeliaSonera following the Oslo rollout.
In a statement issued to Light Reading, Edward Zhou, regional marketing director at Huawei Europe, noted that "TeliaSonera has selected an alternative vendor to roll out a second stage of this deployment due to the lower commercial terms offered by that vendor."
However, it has plenty of other LTE business in Scandinavia, having landed other significant nationwide deals in Sweden, with Net4Mobility (a joint venture between Telenor Group (Nasdaq: TELN) and Tele2 AB (Nasdaq: TLTO)), and in Norway, with Telenor. (See Huawei Beats Ericsson to Swedish LTE Deal and Huawei's Nordic Coup.)
Huawei claims to have built 42 LTE commercial and trial networks worldwide. And the vendor has plenty of other carrier engagements to focus on. (See Huawei Claims 2009 Revenues of $21.5B.)
Heavy Reading's Brown believes Huawei's significant involvement with Telenor, which is TeliaSonera's main rival in Norway and Sweden, might also have affected TeliaSonera's decision to expand its LTE networks without the Chinese vendor: TeliaSonera might not have wanted to build a network too similar to Telenor's, notes Brown.
Ericsson asserts its authority
With an exclusive deal for the important evolved packet core (EPC), and a share of the LTE radio access network (RAN), too, Ericsson "has come out best overall," notes Brown.
The packet core choice is the most interesting, notes the analyst, because it gives Ericsson a proof point for its platform based on the SmartEdge IP platform technology from its Redback Networks division. "This is a big deal for Ericsson and Redback," says Brown. (See Core Network Challenges LTE Vendors and Ericsson Launches LTE Core.)
Ericsson is also providing integration services for the deployment of the core network but says it hasn't been engaged for RAN integration services at this stage.
— Ray Le Maistre, International Managing Editor, Light Reading
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