Ericsson warns again about losing market share in China

Sweden
Ericsson President and CEO Börje Ekholm has warned repeatedly that excluding Chinese vendors in Sweden is bad for competition. (Pixabay)

Ericsson is once again sounding the alarm bells over Sweden’s plans to exclude Chinese vendors from the 5G buildout, saying it may “adversely impact” the economic interests of Sweden and specifically, Ericsson.

Stockholm-based Ericsson previously issued warnings in its fourth-quarter 2020 and 2020 annual reports.

The company is in the process of issuing a EUR 500 million ($610 million) unsecured 8-year bond. In connection with that proposed issue, it’s updating the risk factors in its prospectus regarding geopolitical and trade uncertainty.

“Of special relevance for Ericsson in this context is the trade relationship between Sweden and China, since Ericsson, even though it is a global company with a presence on all global markets, has its headquarters in Sweden and therefore risks collateral damages from a weakened Swedish-Chinese relationship as a result of this decision,” Ericsson stated.

“While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the company’s current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share,” the Swedish vendor explained.

China accounts for about 8% of Ericsson’s sales and represents a much larger market opportunity for Ericsson than its own home market of Sweden.

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Ericsson President and CEO Börje Ekholm has warned repeatedly during quarterly conference calls that excluding Chinese vendors, namely Huawei but ZTE as well, is bad for competition.  

Reports surfaced earlier this year that Ekholm lobbied Swedish Foreign Trade Minister Anna Hallberg for help in reviewing an order by the Swedish Post and Telecom Authority (PTS) that operators must remove Huawei and ZTE from existing infrastructure used for 5G by January 2025. So far, his calls appear unsuccessful.

In October, the PTS announced that four entities were approved for participating in Sweden’s 3.5 GHz and 2.3 GHz auctions. In January, the winners were announced: Teracom, Telia Sverige, Net4Mobility and Hi3G Access.  

In the U.S., operators that used Huawei and ZTE as network suppliers are required to remove that gear and replace it with equipment that is not deemed a national security risk.

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The Rural Wireless Association (RWA) recently asked for more leniency in the time operators have to “rip and replace” the gear from Chinese vendors. The U.S. government agreed to cover their costs, but operators haven’t yet received the funds to actually do the work.  

The FCC is in the process of forming the rules for distribution of $1.9 billion that was appropriated in December 2020 to help operators in their rip and replace efforts. The first distribution of those funds isn’t expected until early 2022.