The fortunes of Chelsea, one of England's biggest soccer clubs, and Ericsson, one of the world's largest telecom equipment suppliers, could hardly look more different.

In May, at around the same time Chelsea were being crowned champions of the English Premier League, Ericsson AB (Nasdaq: ERIC) had just reported the latest in a long sequence of disappointing quarterly results. Now touting a new partnership with the club, Ericsson must hope that some of Chelsea's prize-winning form rubs off on its own loss-making operations. (See Ericsson Strikes Connected Stadium Deal with Chelsea FC.)

But in its current shape, the deal may be relatively short lived. Building on an existing relationship with Chelsea, Ericsson is to provide connectivity services at the club's Stamford Bridge stadium in London. The goal is to ensure fans can take full advantage of the online experience, using smartphones and tablets to watch video highlights and order food or merchandise from their seats. Yet the arrangement looks anachronistic in two respects:

For one thing, the connectivity technology of choice is WiFi, rather than a more advanced 4G or pre-5G system. The deal also shows Ericsson teaming up directly with an enterprise, when it has recently said it will pursue all enterprise business in future through service provider partners. The contract with Chelsea is to last just two years -- about the same length as a typical consumer smartphone one. (See Ericsson Denies Ditching the Enterprise Market.)

Using WiFi and avoiding telco partners will carry big advantages over that period, says Arun Bansal, the recently appointed head of Ericsson's operations in Europe and Latin America. A partnership involving one of the UK's operators would benefit only fans on that network, he points out. Similarly, any short-term solution based on cellular technology would not be "carrier-neutral," he says.

Figure 1: Arun With a View Arun Bansal, Ericsson's head of Europe and Latin America, says connectivity technologies are transforming the stadium experience for sports fans.

Eventually, though, both carriers and cellular technology are likely to figure prominently in Ericsson's dealings with Chelsea. And Ericsson's expectations about the evolution of this arrangement speak volumes about its future partnership and technology plans.

On the technology front, more advanced 4G and 5G technologies should hold far bigger attractions than WiFi for all parties concerned. To a significant degree, that is because of the very low "latency" -- the delay in sending signals over data networks -- that 5G will bring. With managed WiFi, says an Ericsson spokesperson, a user might experience latency of about 25 milliseconds. On advanced 4G and 5G systems, it should fall to below 10 milliseconds. Such levels could open up a variety of new service opportunities in a stadium setting, allowing customers to watch high-definition instant replays more easily, for instance. (See ETSI Gets Edgy About Mobile and The Growing Pains of 5G.)

Guaranteeing a carrier-neutral service as Ericsson moves toward a cellular solution will not be straightforward, though. Ericsson's new strategic direction could make it even harder. Unlike rivals Huawei Technologies Co. Ltd. and Nokia Corp. (NYSE: NOK), which are appealing directly to enterprise clients, it has decided to use service providers and US partner Cisco Systems Inc. (Nasdaq: CSCO) as its sole channels to market. (See Nokia: A Global Network Operator for the Enterprise? and Huawei Takes Aim at AWS, Google With Public Cloud Move.)

All three vendors, however, share the view that enterprise organizations across a number of vertical markets will increasingly start to invest in their own private or privately managed cellular networks, especially as 5G takes off. A hospital, for example, could operate localized 5G networks to support remote surgery, whereby doctors manipulate scalpel-wielding robots from hundreds of miles away. One of Nokia's biggest mining customers has been rolling out its own private 4G network, using its own spectrum license, to support internal applications. (See Does Ericsson's 5G-for-Healthcare Biz Case Need Surgery?)

"In five or ten years there will be localized licenses for 5G where different industrial use case owners have their own licenses instead of being dependent on operators," says Bansal in a discussion with Light Reading. "That means they can deploy their own 5G system if they don't want to be tied to a particular operator… and that is why we are exploring neutral-host solutions."

Where Ericsson differs from Huawei and Nokia, clearly, is on the channel to market. The Chinese and Finnish suppliers are intent on partnering directly with enterprise organizations now and in the future, cutting out service providers as partners on some deals (although certainly not all of them). Ericsson believes it makes more sense to work through service providers that are also taking a much keener interest in the enterprise market. "It may be not that Ericsson is signing a 5G contract with Chelsea but that one of our customers is signing a contract with Chelsea," says Bansal.

So while there might not be a "neutral" cellular option today, Bansal envisages a scenario in which a UK telco builds a localized 5G network for Chelsea in partnership with Ericsson. With the requisite license, Chelsea would then be able to offer services directly to its fans, much like a new and improved mobile virtual network operator, and support machine-based connectivity needs at its football ground.

Next page: Taking on Huawei and Nokia

Taking on Huawei and Nokia
Nevertheless, the narrowing of Ericsson's focus has stoked some concern that it has become too focused on profitability needs, and could lose out to its rivals in important growth areas. Nokia, notably, believes the enterprise markets it aims to serve directly are worth about €18 billion ($21 billion) in sales and will grow at a compound annual growth rate (CAGR) of 13% over the next five years. While its main addressable market is estimated to be worth as much as €113 billion ($130 billion), Nokia sees this growing at a CAGR of just 1% over the same period. (See Nokia to Create Standalone Software Biz, Target New Verticals.)

Bansal is eager to quash any perception that Ericsson may be targeting such enterprise markets in the wrong way. "Our view is that operators are in the best position to succeed because they have the channels and the presence and the billing relationships with enterprises today," he tells Light Reading. "That is why we are limiting the focus."

Not courting enterprises directly also lessens the risk of competing against service provider customers for enterprise business. Nokia has downplayed this risk, emphasizing that it would not do anything to jeopardize the relationships it has with its biggest customers. Yet if Ericsson is to use service providers as channels, it is not hard to imagine a situation in which Ericsson and a telco partner are fighting Nokia or Huawei over an enterprise deal.

Ericsson's decision to ditch other enterprise channels, under newish CEO Börje Ekholm, is perhaps no great surprise. At its Capital Markets Day in November 2014, it announced an ambition of generating between 20% and 25% of revenues from non-telco customers by 2020, up from about 10% in 2013. Yet sales from outside the telecom sector remained static at 10% of total revenues last year, according to the company's 2016 annual report. A drastic overhaul was required, Ekholm appears to have concluded.

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While Ericsson is not disclosing any revised enterprise targets, its amended enterprise strategy would seem to make sense from the perspective of Bengt Nordström, the CEO of the Northstream market research and consulting group. "Their sales channels are not geared for the enterprise market," he said about telco vendors' ability to address enterprise customers directly, during a previous conversation with Light Reading. "On a global basis there are probably hundreds of millions of enterprises from small shops to multinational corporations and they all have different needs and that is why sales networks need to be so big."

Chelsea is just a very small part of the story, of course. Nor does it slot neatly into one of the adjacent vertical markets that Nokia is targeting. It could well be that Ericsson and Nokia clash over such deals in partnership with telcos. For Nokia, the challenge may lie in convincing those telcos it is not also a rival.

As regards Ericsson, the development of the Chelsea relationship will certainly be worth monitoring given the Swedish vendor's latest strategic priorities. And deals with trophy-winning organizations always make for good publicity.

— Iain Morris, , News Editor, Light Reading