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Eurobites: Ericsson Partners With Fujitsu on 5G

Also in today's EMEA regional roundup: BT down after Jansen appointment; Orange's data center plans; Proximus raises guidance.

Iain Morris

October 26, 2018

5 Min Read
Eurobites: Ericsson Partners With Fujitsu on 5G
  • In a move that points to a more open radio access network (RAN), Ericsson AB (Nasdaq: ERIC) announced a partnership with Japan's Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) to jointly build 5G networks. The vendors say they will initially target opportunities in Japan before they turn their attention to other global customers. The tie-up could be a response to customer demand for more interoperability in the radio access network, allowing one vendor's signal processing equipment to be used with another's radios. The closed interfaces in today's market force an operator to buy everything from the same supplier, or from that supplier's partners, but operators are pushing for change through industry associations like the Open RAN Alliance (ORAN Alliance) and the Facebook-led Telecom Infra Project.

    While openness could seem like a threat to Ericsson, it may have more to lose from resisting change, and recently confirmed to Light Reading that it had attended ORAN Alliance meetings and was considering its future relationship with the group. In its statement on the deal, Ericsson makes specific reference to Fujitsu's "concerted efforts to support open standards activities driven by major telecom providers" and says the Japanese company "aims to achieve broad interoperability for its radio access products in global markets."

    The move follows a similar tie-up between South Korea's Samsung Electronics Co. Ltd. (Korea: SEC), an increasingly aggressive challenger in the 5G equipment sector, and Japan's NEC Corp. (Tokyo: 6701). Fujitsu's partnership with Ericsson could boost its international presence: Its share of the global market for basestations is just 0.9%, according to IHS Markit, while Ericsson's is 26.6%. (See Why Resistance to the Open RAN May Crumble, Have We Reached Peak Ericsson? and Ericsson Weighs ORAN Alliance Membership.)

    • Shares in BT Group plc (NYSE: BT; London: BTA) closed down nearly 3.4% yesterday after the UK telecom incumbent revealed that Worldpay boss Philip Jansen would succeed Gavin Patterson as CEO early next year. (See Eurobites: Worldpay's Jansen Lands BT Top Job.)

      The slump suggests BT's shareholders are not enthused by the prospect of a BT led by Jansen, whose links to Patterson and former BT Chairman Mike Rake hardly create the impression of a radical break with the past. While Patterson lavished billions on TV sports rights, and was criticized for underinvestment in broadband infrastructure, Jansen will have to prioritize cost cutting, with 13,000 jobs set to go under current plans. He will also need to figure out how BT funds the rollout of higher-speed, all-fiber networks with revenues under pressure from competition and regulation. BT's share price is thought to have slid partly because of comments made by Jan du Plessis, BT's current chairman, about spinning off the Openreach networks business. He is reported to have ruled out such a move despite recent calls from some activist shareholders to consider it.

      Openreach, which provides network services to broadband operators, is today managed as a legally separate entity to ensure it does not favor BT over other retail customers, but it continues to remain a part of the BT Group. Opponents, including some of Openreach's wholesale customers, believe a spin-off would level competition and bolster investment. This "structural separation" might suit shareholders who want BT to focus on services and new digital opportunities rather than building networks. BT's share price had fallen another 3.64% this morning at the time of publication. (See Eurobites: Worldpay's Jansen Lands BT Top Job, BT Offers CEO Job to Worldpay's Boss – Report and BT Waves Goodbye to Gorgeous Gavin.)

    • France's Orange (NYSE: FTE) said it would need two layers of data centers across its footprint to meet all future service requirements, with a few national data centers complemented by "tens" of local facilities.

      Speaking at this week's Broadband World Forum in Berlin, Christian Gacon, Orange's vice president of wireline networks and infrastructure, said the French operator was building national data centers to host control and management functions and would use its local facilities for virtual baseband units and other applications that demand low latency connections.

      A major challenge for the operator is ensuring there is sufficient "redundancy," according to Gacon. "The solutions we have today are not good enough," he said. "OpenStack means you have to implement a full instance in each data center. Today we can build a hierarchical architecture but it is not flexible." Another concern is about edge computing, which could force Orange "to go beyond tens of data centers and maybe implement small ones at the central office level," said Gacon. Doing that would be extremely expensive, he pointed out, and difficult to justify without evidence that new business opportunities would pay for the upfront investment. (See Orange Faced With 'Reskilling' Task for 50K Workers.)

    • Belgian telecom incumbent Proximus has raised its outlook for profit growth this year after roaming expenses and some other costs turned out to be lower than originally expected. CEO Dominque Leroy said the company was now expecting growth in earnings (before interest, tax, depreciation and amortization) of between 2% and 3%, after Proximus had previously anticipated only "slight growth" in the annual figure. Revenues for the recent third quarter were stable at about €1.4 billion ($1.6 billion), while earnings were up 1.4%, to €470 million ($534 million). (See Eurobites: Proximus Snaps Up Managed Security Specialist.)

      — Iain Morris, International Editor, Light Reading

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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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