All the major equipment vendors are pinning high hopes on 5G to kickstart revenue revival, of course, but Ericsson is the one for which success is most critical, since it has backed away from alternative growth areas like enterprise networks. Nevertheless, it may have been premature to launch a salvo across the bows of Nokia and Huawei, claiming to be more 5G-ready than they are – and provoking an angry response.
Ericsson’s claims rest on its Ericsson Radio System (ERS), which claims to be “software upgradeable” to 5G when that becomes available. ERS currently accounts for about 55% of Ericsson’s radio shipments, and that figure should reach 100% next year.
Arun Bansal, head of Ericsson’s business in Europe and Latin America, told reporters at the company’s 5G event in London last week: “With ERS we are the only vendor in the world delivering baseband that is 5G-ready today. When operators realize that there is a tremendous pull now to go for Ericsson baseband.”
He also claimed that an ERS deal with Vodafone UK came as a replacement for competitive systems (though Ericsson is the operator’s main RAN vendor) “The one contract we announced was in London where we are swapping out one of the existing partners of Vodafone, and that is a sign of leveraging our ERS portfolio … to drive market share in Europe,” Bansal told LightReading.
Both Huawei and Nokia, when contacted by reporters at the paper, hit back at the claims. Huawei said: “Our base stations are designed to support 5G. The Huawei radio platforms (5000 series Massive MIMO and 3000 Blade series RRU) are upgradable to support 5G NR (numerology, frame structure etc) right now. These platforms are already deployed economically; and the Huawei baseband platforms (both 5900 and 3910) are capable of supporting 5G NR according to 3GPP standards.”
A Nokia spokesperson said Ericsson’s boast was “misinformation” and that its AirScale RAN platform has had 5G-ready baseband capabilities since last year. The firm says it has about 100 AirScale customers and the product is being used in 5G-related trials.
Like software upgradeable systems in every mobile generation, the idea of ERS is to help operators access new functionality ahead of new standards, while promising a smooth migration to the next generation (though those promises do not always come true. One of the reasons for WiMAX’s failure was the difficulty of moving between different releases of the standard.)
The advantage to the vendor is to gain incumbent advantage when 5G deployment starts, a strategy Ericsson is pursuing particularly keenly in China, where CEO Börje Ekholm expects 5G roll-out to start in 2-3 years’ time – though Bansal said the same strategy would be followed in Europe and elsewhere.
“We are preparing for 5G and that will come on top of 4G. It is critical that we establish market share in 4G,” Ekholm told analysts on the recent quarterly earnings call, though some of the attendees were concerned that share was being achieved by offering cut-price deals – Ericsson has said its gross margin in Greater China, which accounted for 12% of its sales in the last quarter, would decline in Q4.
On the call, analyst Francois Meunier of Morgan Stanley, recalled similar tactics at the start of 4G. “You gained a bit of market share for a year or 18 months but it didn’t work in the long term,” he told Ekholm. “What gives you the confidence this time that giving away equipment gives you a lasting market share advantage?” (the question went unanswered).