With Huawei Technologies Co (華為) barred from the UK’s wireless networks, its two European rivals look set to split the market.
The ban — forcing phone companies to remove 5G Huawei equipment by 2027 and stop buying it by the end of this year — is a blow to the industry, which had lobbied hard to keep Huawei, and not just because of the burden of having to redesign the next-generation networks they were already building.
It also turns the UK’s wireless radio equipment market into an effective duopoly of Finland’s Nokia Oyj and Ericsson AB of Sweden.
The companies that run the UK’s communications infrastructure would be bracing for higher prices and would have little choice but to use both Nokia and Ericsson if they are to avoid becoming dangerously reliant on either vendor.
“In the short term, carriers can play one supplier off against the other,” Enders Analysis director of telecoms James Barford said. “But a medium to long-term consequence of not having Huawei means less pricing tension in the market.”
Huawei was popular with carriers because of its competitive pricing, and its emphasis on research and development, which often gave its gear a technological edge.
Removing Huawei from the mix so early in the cycle for the 5G upgrade means the phone companies miss an opportunity for steeper discounts.
The two European suppliers have a further opportunity to entrench their position against newcomers, as carriers would need to swap out some of their Huawei 4G gear for Nokia and Ericsson equipment before installing 5G.
Tuesday’s decision was especially welcome for Nokia, which has struggled to gain traction in 5G equipment.
Cormac Whelan, chief executive officer for Nokia in the UK and Ireland, said that “we have the capacity and expertise to replace all of the Huawei equipment in the UK’s networks at scale and speed.”
Ericsson vice president Arun Bansal said that carriers can prevent increased costs and substantial delays by swapping out Huawei equipment sooner.
“The whole mobile infrastructure is built with swaps every five to seven years, depending on the technology cycle,” he said. “The longer it takes to swap, the more cost operators have.”
When the British government began planning Huawei restrictions earlier this year, it opened talks with Japan’s NEC Corp and Samsung Electronics Co to determine whether those companies could replace Huawei, a person familiar with the matter said at the time.
However, there has been no word of progress on those talks since early last month, when they were reported by Bloomberg.
Even if a company like Samsung was able to step into Huawei’s place for 5G, it would have to make technology that works with the older 2G and 3G standards that still exist in UK networks.
European operators like to use compatible gear for all of the generations of wireless service, which makes it easier to allocate signal across the technologies and use their spectrum more efficiently, Barford said.
Carriers are also trying to help themselves by lobbying for a more open network architecture that would make it easier to plug in parts from different suppliers.
Vodafone Group PLC has begun issuing small contracts for OpenRAN, an initiative that aims to standardize radio access network hardware and software.
Chief executive officer Nick Read said in October last year that Vodafone was “ready to fast track it into Europe, as we seek to actively expand our vendor ecosystem.”
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