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Ericsson turns Huawei lobbyist with China biz at stakeEricsson turns Huawei lobbyist with China biz at stake

It is little wonder the Swedish equipment vendor has leapt to Huawei's defense in Sweden, whatever it really thinks about its Chinese rival.

Iain Morris

January 7, 2021

4 Min Read
Ericsson turns Huawei lobbyist with China biz at stake

Confounding hopes for a semi-normal January, 2020's madness has crashed into 2021 like a New Year's Eve reveler with no respect for his hungover neighbors. Coronavirus is "out of control," in the words of a UK government minister, reinvigorated after its late-summer lethargy by some energy-boosting mutations. Trump-loving criminals, including a half-man, half-moose hybrid, attempted to unseat the US government. And Ericsson joined forces with Huawei to thwart the Swedish government's sinister plans for a ban on Chinese network equipment.

It will not garner the same headlines as the latest chapter in the pandemic, or the American insurrection, but the sight of Sweden's 5G supremo sticking up for its Chinese nemesis is not typical. Until Sweden's government soured on China, all Ericsson had said about the geopolitical situation was that "uncertainty" was bad for investors. When governments in Australia, France and the UK decided Chinese 5G vendors were unwelcome, Ericsson preferred not to comment.

But Swedish executives must have felt as satisfied as some Olympians did when Sun Yang, an obnoxious, gold-medal-winning Chinese swimmer, received an eight-year ban in 2020 for missing drugs tests (recently overturned, to the probable disappointment of rivals). Over the past decade, Huawei has been a boastful nuisance to Ericsson, luring customers to its competitively priced and increasingly advanced technology – and all amid rumors that it stole intellectual property, flouted WTO rules and received billions of dollars in Chinese state aid (charges that Huawei denies).

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Yet to publish 2020 results, Huawei made revenues of about $31.8 billion in Europe, the Middle East and Africa in 2019. A huge chunk of that will have come from sales of network products to European carriers. Huawei's disappearance, then, creates a massive opportunity for Ericsson. In the UK alone, it has already been able to land contracts with BT and Three, two operators it did not previously serve, thanks to a looming Huawei ban.

Unfortunately, similar moves by Sweden are more of a threat to Ericsson than an opportunity for it. While Swedish operators other than Telia are heavily reliant on Huawei, the market of just 10 million people is too small to make a big difference to Ericsson financially. And if China responds to Sweden's restrictions, then Ericsson, as a Swedish business, could suffer.

Strategic disaster

Potentially, this could be a strategic disaster. Ericsson's share of the Chinese mobile infrastructure market is less than 12%, but that counts for a lot in a country that built 700,000 5G basestations last year and plans another 600,000 in 2021. Year-on-year, Ericsson's sales to Chinese operators soared 44% in Ericsson's third quarter, to about 5.75 billion Swedish kronor ($700 million), with China accounting for a tenth of total revenues, up from 7% a year earlier. It is the only market delivering meaningful growth for the Swedish vendor.

So when Sweden's government said 5G license winners would not be allowed to build networks with Huawei equipment, Ericsson CEO Börje Ekholm soon leaped to his Chinese rival's defense. Besides decrying the Huawei ban in the press, he has also reportedly lobbied Swedish authorities to overturn it. Purportedly, this is about respect for global trade and fair play. More likely, it is motivated by concern about Ericsson's substantial Chinese interests.

Otherwise, Ericsson would have spoken up long ago, when Australia was banning Huawei. Right? Delighted by that move as they probably were, Ericsson's executives could never afford to be as frank as Duncan Scott, a British swimmer who refused to share the podium with Sun Yang at an event in 2019, when Sun won gold and Scott took silver (the respective positions of Huawei and Ericsson in most market-share tables). Unlike Ericsson, Scott owes nothing to China.

The danger for Ericsson is that questions are now raised about its stony silence in other countries. Huawei has already made life uncomfortable for Ekholm and his lieutenants by trying to recruit Ericsson to its cause outside Sweden. "I think it would be welcome if Ericsson in Australia, as well as Nokia, adopted the same approach as their European headquarters," said Jeremy Mitchell, Huawei's director of corporate affairs in Australia, according to a report in the Sydney Morning Herald.

Considering his earlier reticence, Ekholm would probably not welcome a regular grilling on this issue by journalists. "Given your views about the Swedish government's decision, why are you not lobbying the UK and French governments to overturn their bans?" is an obvious question for any hardnosed reporter this year. But governments outside Sweden seem unlikely to change course. If it helps protect his business in China, any awkwardness would be a small price to pay.

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— Iain Morris, International Editor, Light Reading

About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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