Huawei Dealt a Blow: TeliaSonera Chooses Ericsson, NSN

Huawei Technologies has lost out on a major LTE contract with TeliaSonera for deployments in Sweden and Norway.

The news on Wednesday came as a surprise since Huawei was part of TeliaSonera’s LTE rollout last year. And the announcement dealt a blow to the China-based telecom equipment maker, which has gained significant market share during the global recession, selling cheaper gear to cost-conscious operators. But perhaps most of all, the loss may signify that rivals are tired of seeing Huawei creep onto their turf and are prepared to fight hard for lucrative 4G deals.

To that end, Ericsson (ERIC) and Nokia Siemens Networks (NSN) landed the latest round of contracts with TeliaSonera for the LTE buildouts. Ericsson scored the core network contract while NSN will provide part of the radio network. Financial details were not disclosed.

The win was welcome for both suppliers. For Ericsson, it means another step toward maintaining its status as the No. 1 telecom infrastructure supplier. Ericsson also gets to boast about prevailing in its home country, where Huawei has gained some ground.

For NSN, the success means a chance to regain its spot as the No. 2 vendor – research firm Dell’Oro Group in November said Huawei had usurped NSN’s standing. And there’s another important point for NSN: The victory could signal the struggling company’s restructuring efforts are paying off. In November, the joint venture of Nokia and Siemens said it would slash $740 million in annual costs by condensing business units and laying off thousands of workers. If it’s able to run lean and mean, and still abide by contract deadlines, NSN could be well on the way to operating in the black and taking back its No. 2 position.

Finally, that Huawei failed to get more business from an existing customer shows its competitors are willing to duke it out. The distinction among vendors now comes not so much from product portfolios, but from price, functionality and reliability. So, as one consultant told Reuters, Huawei’s contract loss this week probably means it sold the first part of the TeliaSonera pact “at an unrealistically low price.” No company can afford to slash margins on every bid.

Still, Huawei is not bereft of customers or opportunities. Indeed, Huawei says its sales will hit $36 billion this year, up from $30 billion in 2009. To be sure, the company just snagged a huge deployment deal with Net4Mobility, the wireless joint venture of Norway’s Tele2 AB and Telenor ASA, and has forged similar agreements in the Netherlands.

And, in what might help soothe this week’s blow, TeliaSonera plans to keep using Huawei’s LTE gear in Oslo.

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