Eurobites: Russia's MTS to Spend €400M on Ericsson 5G-Ready Gear

Also in today's EMEA regional roundup: Ericsson lands media deal with Fox; Telecom Italia approves Canal+ deal; Arqiva plots flotation.

  • Russian telecom giant Mobile TeleSystems OJSC (MTS) (NYSE: MBT) will spend more than €400 million (US$470 million) on 5G-ready network equipment from Ericsson AB (Nasdaq: ERIC) between now and 2020, the operator revealed in a statement this morning. MTS said it would buy software and hardware that allows it to upgrade 2G, 3G and 4G networks in several Russian regions to support 5G and "Internet of Things" (IoT) technologies in future. The deal is a strategically important one for the Swedish equipment vendor as it looks to win operator support for its Ericsson Radio System (ERS), a network platform it says can be software-upgraded to support the 5G standard as it becomes available. ERS will also support IoT connectivity technologies including NB-IoT and LTE-M, according to Ericsson. MTS earlier this year played down its interest in 5G services, arguing there is "no business case" behind the technology and that it does not figure in its investment plans for 2017 and 2018. Ericsson last week reported signs of improvement at its ailing network equipment business despite a fall in overall sales and a widening of its net loss for the July-to-September quarter. (See Russia's MTS: There Is No 5G Business Case.)

  • Ericsson also revealed that it had landed a broadcast services deal with Fox Networks Group Middle East, the Middle Eastern subsidiary of media giant 21st Century Fox . The Swedish supplier said it would provide playout, media management and global distribution services for three new high-definition channels, expanding the scope of an existing relationship under which it has been supporting Fox channels from a hub in Abu Dhabi. Losses at Ericsson's media business widened in the recent third quarter, and the vendor earlier this year put the division up for "review" as it embarked on a new strategy focused on restoring profitability at its main networks business. Asked by Light Reading if Ericsson was close to finding a buyer for the media business, as well as a cloud hardware business also up for review, Carl Mellander, the Swedish company's chief financial officer, said: "I would downplay the impact of the cloud infrastructure business. We are pursuing options there but it will not have a serious impact on financials. When it comes to media, we are making good progress. We have a process ongoing but I can't comment on it." (See Ericsson CFO: Automation Is Helping Us Cut Jobs.)

  • Telecom Italia (TIM) has approved the creation of a joint venture with Canal+ that will develop TV content for the Italian operator's broadband customers. TIM would control 60% of the business, with TV company Canal+ holding the remaining stake. The deal has been masterminded by French media conglomerate Vivendi , which owns Canal+ and is the largest stakeholder in TIM, with nearly one quarter of its shares. "With this transaction, TIM is taking an important step forward in the strategy of convergence between telecommunications and media," said TIM CEO Amos Genish, a former executive at Vivendi, in a company statement. "'[It] will… allow us to seize new opportunities for growth… through a commercial offer of fiber connectivity combined with premium video content." Italian authorities have expressed concern about Vivendi's influence over TIM, although the French company has denied it is in control of the telco. Vivendi also owns a large stake in Italian broadcaster Mediaset S.p.A. , with Reuters reporting that this company could become a part of the joint venture between TIM and Canal+ at a later stage. (See Telecom Italia Drama: What Is Vivendi Up To?.)

  • UK towers business Arqiva is reportedly planning a £4.5 billion ($5.9 billion) flotation after recent efforts to sell the business led nowhere. According to the UK's Financial Times, which cites sources close to the matter, the company aims to start trading in November with a projected enterprise value of £6 billion ($7.9 billion), including debt, and hopes to raise £1.5 billion ($2 billion) during an initial public offering, using that amount to pay off loans and reduce dependency on interest rate swaps. The news comes amid concern about profitability at Arqiva, which is said to have recorded net losses of about £900 million ($1.2 billion) in the last three years, largely on account of interest rate payments. Arqiva is reported to have recently held fruitless talks with a consortium of potential buyers led by Canada's Brookfield Investments. The company earlier this year unveiled plans to offer a 5G-based wholesale broadband service using spectrum assets in the 28GHz band. (See Arqiva: 5G FWA Can Shine in London.)

    — Iain Morris, News Editor, Light Reading

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