Competition Heats Up in Vendor 4G LTE Market as Huawei Grabs Tele2/Telenor Swedish Order

The 4G joint venture (JV) of Tele2 and Telenor has announced it has have selected Huawei to supply its 4G Long Term Evolution (LTE) in Sweden, and plans to launch a full commercial service in 2010. Net4Mobility, the 4G JV between the two Nordic carriers Tele2 and Telenor, says it is aiming to cover 99% of the Swedish population before the end of 2013, with the roll-out beginning in the capital Stockholm and other densely populated areas.

The deployment will also include Chinese equipment vendor Huawei increasing the number of 2G base stations for voice traffic by 30% to 50%, to improve coverage indoors and in rural areas, which the operators say will lead to better voice coverage over the whole country. None of the companies involved has released any financial details of the deal.

The news comes as Huawei announces its trial network with TeliaSonera in Norwegian capital Oslo has reached peak download speeds of 96 Mbps, which the Chinese giant has noted compares favourably with the 44 Mbps on the operator's system in Stockholm, Sweden, which was constructed by local vendor Ericsson.

Outlook and Implications

• A Key Win for Huawei as the Vendor 4G Market Heats Up: Tele2 and Telenor, which announced the formation of their 4G JV Net4Mobility in Sweden in April 2009 (see Sweden: 9 September 2009: Telenor Confirms LTE Launch in 2010), have not given any reasons for selecting Huawei to roll out their LTE network, stating just that Huawei is contributing high technical competence and cost effectiveness, and that both are key in their extensive investment in the build out of a nationwide 4G network in the country. However, the agreement represents a key win for the Chinese vendor in world-number one telecom equipment manufacturer Ericsson's home country—indeed, the Swedish giant has taken the unusual decision to comment on the deal, saying it was "disappointed" it did not win the contract and that it was effectively beaten by Huawei on price. This, coupled with Huawei's rather cheeky statement concerning the speed of the Norwegian network it has constructed for TeliaSonera, is some representation of the increasing acrimony developing in the 4G networks markets, the key area of growth for the struggling vendors, as operators are expected to spend huge amounts over the coming years on LTE to meet surging demand for mobile data traffic and services such mobile TV and gaming.
• Huawei and Ericsson Go Head to Head on LTE  Ericsson's sheer size has given it some degree of resistance to the ongoing global economic slowdown that has seen its smaller European rivals Alcatel-Lucent and Nokia Siemens Networks (NSN) suffer serious losses (see World: 7 December 2009: Ericsson Predicts it Will Outstrip Mobile Vendor Market Growth Next Year—Report). However, even the Swedish giant, which recently paid US$1.1 billion for bankrupt U.S. vendor Nortel's key CDMA and LTE wireless technologies, has reported flat growth in the last quarter as business continues to dry up as operator capital expenditure is slashed (see Sweden: 9 December 2009: Ericsson Announces a Further 950 Job Losses in Sweden as Cost-Cutting Accelerates). Ericsson has been growing its business, claiming some recent LTE wins in the Far East (see Taiwan: 17 December 2009: Chunghwa Telecom, Ericsson to Trial LTE in Taiwan), something that will have irked Chinese rivals Huawei and ZTE. However, Huawei in its turn is winning its fair share of 4G contracts in Europe (see United Kingdom: 14 December 2009: O2 UK Announces Successful Trial of LTE with Huawei)— but the decision by Telenor and Tele2 to award their Swedish roll-out to the Chinese giant in really a kick for Ericsson where it hurts.
• Full Steam Ahead for LTE Rollout: LTE is rapidly becoming the 4G technology of choice, particularly in Europe as its growth outstrips that of key rival WiMAX and innovation continues to gather pace (see Sweden: 16 December 2009: ST-Ericsson Claims Successful Trial of Dual-Mode LTE/HSPA Device). Indeed, Telenor stated as part of its current announcement that it has no plans for any large-scale WiMAX launches in Scandinavia, saying it sees no advantage in rolling out the technology and that its current HSPA networks would be sufficient until it has LTE services up and running. In the last fortnight, the Nordic region's biggest telecoms operator, TeliaSonera, claimed the world's first commercial launch of mobile LTE services in Olso and Stockholm (see Sweden: 14 December 2009: TeliaSonera Claims World First as LTE Network Goes Live), as Telefónica continues to trial the technology across six of its key markets with a variety of vendors (see World: 1 October 2009: Telefónica to Trial LTE in Six Countries with Six Vendors). However, not all the vendors are throwing so much weight behind LTE, pointing out that the focus is currently on trials and small-scale urban roll-outs, meaning major revenues will not be forthcoming for a few years yet. Although LTE is undoubtedly the key mobile technology for the future, the boom in the market may come too late for some of the struggling equipment vendors.