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Ericsson: 3G & a Danish, Please

LM Ericsson (Nasdaq: ERICY) has brought some cheer to the ailing network infrastructure market by winning a contract to supply the Danish arm of Hutchison Whampoa Ltd. (Hong Kong: 0013) with third-generation wireless kit.

Hi3G Access AB has selected Ericsson as the sole supplier for its W-CDMA (Wideband Code Division Multiple Access) network (see Ericsson Wins in Denmark). The W-CDMA air interface is part of the universal mobile telecommunications standard (UMTS), which has been adopted as the European 3G standard. Used with existing Global System for Mobile Communications (GSM) core networks, the air interface can crank up data transfer rates to a maximum of 2 Mbit/s (at least in the lab).

According to IDC’s senior research analyst Paolo Pescatore, the deal is significant in that it proves there may still be rich pickings to be had in the W-CDMA market. “Ericsson is demonstrating that it isn’t all doom and gloom out there and there are still companies to win over,” he comments.

The deal furthers the Swedish vendor's existing ties with Hutchison by securing its third European contract win with the 3G greenfield carrier, following deals with its Swedish and Italian ventures.

Both Ericsson and Hutchison tell Unstrung that their original partnership for 3G rollout in Sweden, announced in June 2001, was a major catalyst for today’s Danish deal. “We were looking for ways to maximize synergies out of the two networks,” says Hutchison spokesman Niclas Lilja [ed note: you too, huh?]). “We can have the same guys working on the rollout in both countries. Working with Ericsson in both countries makes perfect sense for us.”

“Today’s deal is based on our proven performance with the Swedish network,” says ever-humble Ericsson external relations manager, Ole Selchau. “The network will be fully integrated with Hutchison’s Swedish network. We see it as an important contract and a reinforcement of our first-class position globally.”

Neither company was prepared to disclose financial details concerning the deal.

The deal marks a rare bright spot in a week that has seen both Ericsson and Nokia Corp. (NYSE: NOK) cast gloomy shadows over the network vendor market. The outgoing Ericsson CEO and president, Kurt Hellström, said Tuesday that demand for wireless network infrastructure will continue to weaken, while the company has also announced a complete restructuring of its corporate management team in an effort to return the business to profitability by the end of the year (see Ericsson: Market Still Waning and Ericsson CEO Names New Team).

Nokia yesterday announced plans to cut 1,800 staff -- over 10 percent of its network division’s workforce -- following the news it would be reporting sales 20 percent lower than originally predicted for the first quarter of this year (see More Finns Finished and Network Warning From Nokia).

IDC's Pescatore adds that Ericsson’s success in being the sole supplier for both Hutchison’s Swedish and Danish businesses will simplify roaming challenges between the two networks. “Hutchison won’t have to tackle the complex problems of getting the network operational in a multivendor environment. Such a wide customer base will also allow Ericsson to leverage off the economies of scale this will create.”

Today's deal marks Ericsson’s second win in the Danish 3G market, having already announced plans to supply market leader TDC Tele Danmark A/S with a W-CDMA network (see TDC Picks Ericsson For 3G ). The remaining two carriers -- Orange Danmark and Telia Danmark -- are yet to announce their choice of vendors, although Pescatore expects Orange to opt for its regular supplier Nokia.

Ericsson also has the luxury of a relatively relaxed deadline for network deployment. Danish regulator NTA (National IT and Telecom Agency) has given the country’s four 3G licence holders until the end of 2004 to provide 30 percent coverage throughout the country, and another four years to complete 80 percent of the region.

— Justin Springham, Senior Editor, Europe, Unstrung

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