Europe’s top infrastructure makers Nokia and Ericsson could be punished for trade sanctions imposed on Russian companies by being frozen out of its long-term future 5G building plan. Equally hurt will be the Russian operators such as Veon, MegaFon and MTS that the Scandinavian giants have been supplying.
The biggest winners are expected to be Chinese groups, such as ZTE, but mainly Huawei, reports EE Europe Times. “We are urgently reviewing how our business might be affected by the events and the sanctions imposed. We are suspending all deliveries to Russia while we conduct our analysis,” said Ericsson CEO Borje Ekholm.
Nokia has confirmed it will fully comply with national sanctions and that it had stopped all deliveries to Russian telcos. Since then Nokia CEO Pekka Lundmark has expressed concern over the continuing conflict with a statement: “Nokia stands for human rights, international cooperation and the rule of law.” This was coupled with a €1 million donation to UNICEF to fund its humanitarian work in Ukraine.
The Russian mobile operators’ only credible option for their 5G roll-out aspirations will be Huawei. This means the operators will have to take a huge financial hit as they swap out a huge volume of Scandinavian network gear that they can no longer support. MTS used the Scandinavian suppliers for the bulk of its mobile infrastructure equipment. MegaFon signed a large, multi-year contract for a significant nationwide microwave backhaul deal with Ericsson three years ago.
It seems likely that both companies will have to significantly increase production in Russia, and that would mean partnering with local firms that have limited expertise in making 4G and 5G infrastructure gear. The loss in annual revenues to Nokia and Ericsson is a moot point since a breakdown of figures is not available. By comparison Ericsson said last year UK is its fourth largest market, but generates just 3 per cent of annual revenues. Since Russia is not within the Ericsson top 5, it’s likely to represent less than two per cent of its sales.
The Russian roll-out of 5G has only just started and the impact of these sanctions will seriously delay the availability of new technology, says EE Europe. US sanctions on the semiconductors needed for 5G equipment means Huawei will not have access to them and neither will ZTE, which relies significantly on semiconductors and other components from the US.
The US government now restricts ‘sensitive US technologies produced in foreign countries using US-origin software, technology or equipment’. “This includes Russia-wide restrictions on semiconductors, telecommunications, encryption security, lasers, sensor, navigation, avionics and maritime technologies,” stressed the White House edict. “It will take the Chinese groups several years before they will be able to match the kind of state-of-the-art chips available to Ericsson and Nokia, from the likes of Samsung, Intel and TSMC,” said EE Europe.