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27 July 2020

Ericsson has two strong cards – modernization and DSS – for nervous telcos

Despite Ericsson CEO Börje Ekholm’s rather scathing remarks about European 5G (see separate item), it will be essential that Ericsson leverages its current advantage in its home region, over both Huawei and Nokia, in order to establish a 5G installed base that is hard for old or new challengers to assail. Its strongest card is to be the ‘safe choice’ for operators which are concerned about Nokia’s 5G teething troubles and architecture changes, and which are nervous of relying on Huawei (even in countries where there is no outright ban – the UK’s change of heart, from a cap on Huawei 5G and fiber equipment, to a complete block, shows how situations can change rapidly for operators).

Deutsche Telekom is one large European telco which has played it safe and selected Ericsson for its 5G RAN on a national basis. DT had already said it would exclude Chinese equipment from its 5G core, but it was understood that Huawei remained its first choice for large sections of the RAN, especially as the companies have worked closely together on 4G and on 5G trials. Its 4G RAN suppliers are Huawei and Ericsson, but most of its 5G deployment so far has relied on Chinese equipment.

But Claudia Nemat, DT board member for innovation and technology, said in a statement: “We are pleased to have found a leading 5G supplier in Ericsson as a partner, who has also convinced us in the past in the modernization of our mobile access network. After the reliable and on-time modernization, the bar for the 5G roll-out in the antenna network is naturally also high.”

That modernization was largely an exercise to replace Nokia base stations with Ericsson kit, after Nokia lost its place in DT’s network in 2017. The apparent success of the exercise will prove very valuable to Ericsson in the years ahead, as it endorses the vendor’s claims that replacing an incumbent supplier does not have to be as long and expensive a process as it used to be. At the start of 4G, Ericsson often complained that modernization projects delivered lower margins than new roll-outs, but it has established itself as something of a leader in this field, which could now be a critical requirement for many European operators.

Ericsson will provide modernization services, presumably including replacement of some Huawei gear. It already provides multi-RAN equipment, supporting 2G, 3G and 4G, with some 5G readiness, to DT in some areas. DT will also use Ericsson’s dynamic spectrum sharing (DSS) solution, which allows 4G and 5G traffic to use the same spectrum bands on an as-needed basis, greatly boosting spectral efficiency and flexibility. Ericsson has been the first vendor to provide fully commercial DSS solutions and this has proved a significant differentiator in several markets, notably the USA, where Verizon and AT&T are keen to use DSS to mitigate their shortage of midband 5G spectrum.

The procurement decision removes uncertainty for DT, since the German government will not make its final decision about Chinese equipment in 5G until at least September. So far, the government has resisted US calls for a ban on Huawei, but with elections looming that could change.

But this is a major blow for Huawei – DT documents leaked in the German media recently indicated that, even early in 2020, Huawei was still described as a key strategic 5G partner, and DT executives had likened a Huawei ban to “Armageddon” because of the equipment replacement that would be required, and the restricted choices for future roll-outs. Most of DT’s existing 5G roll-out has used Huawei kit, and the telco had pointed to a €3bn ($3.5bn) bill to replace this.

Even if Ericsson funds some of the rip-and-replace process, it will not be plain sailing for DT. Huawei is said to have provided about two-thirds of the DT 4G network, and since 5G Non-Standalone is built on top of that in most cases – and some 4G sites have been replaced by 2G/3G/4G/5G SingleRAN units – a great deal of LTE kit will have to be replaced too, some of it after only a short time in use, and even some 2G/3G in order to keep voice services going (a challenge which was recently highlighted by the UK’s BT, as a barrier to adopting a new vendor such as Samsung). A 5G overlay is an alternative, since there is unlikely to be a ban on keeping Huawei LTE equipment, but this requires additional spectrum.

In France, another country which is still mulling restrictions on Huawei (see separate item), incumbent telco Orange recently selected Nokia and Ericsson as its 5G suppliers nationally.

Another 5G success for Ericsson has come in Japan, where its RAN deal with Softbank has been extended to include the dual-mode 4G/5G core. Ericsson will supply its Cloud Packet Core, Cloud Unified Data Management and Policy, and Ericsson NFV infrastructure (NFVi).

“Ericsson’s cloud native dual-mode 5G Core provides the cutting-edge container-based microservice architecture that will help Softbank to develop new business models towards consumers, enterprise and industry partners as well as to move onto the next level of network operational efficiency,” said Luca Orsini, head of Ericsson Japan.