December 7, 2018 / 11:56 AM / 9 days ago

Breakingviews - Ericsson debacle exposes costs of anti-Huawei push

A woman stands at the booth of Huawei featuring 5G technology at the PT Expo in Beijing, China September 28, 2018. Picture taken September 28, 2018. REUTERS/Stringer

LONDON (Reuters Breakingviews) - A global anti-Huawei push risks making an already concentrated market even less competitive. The drive is defensible on security grounds, but could lead to higher mobile bills, less investment and more widespread outages like the one caused on Thursday by Swedish group Ericsson’s glitchy software.

Britain’s O2 and Japan’s SoftBank - with over 70 million mobile customers between them - reported outages on their 4G networks and blamed faulty Ericsson kit. The Stockholm-based supplier apologised and said an expired security certificate was responsible.

Companies’ shares usually crash after such high-profile failings, yet Ericsson’s are up 5 percent from Wednesday’s close, with Nordic peer Nokia up almost as much. They can thank a global backlash against rival Huawei. The Chinese telecom-kit supplier’s chief financial officer is under arrest in Canada over alleged violation of U.S. sanctions on Iran. Meanwhile the Japanese government may ban purchases of Huawei equipment over fears of intelligence leaks and cybersecurity, Reuters reported on Friday citing sources. Britain’s BT Group on Wednesday said it would rip Huawei equipment from its core telecom network. And Australia and New Zealand have blocked the company from building new 5G networks.

There will be an economic price to pay, however, from holding back a low-price player in an already concentrated sector. Huawei accounted for 28 percent of the mobile infrastructure market last year, according to IHS Markit, with Ericsson at 27 percent and Nokia on 23 percent. Fourth-placed Chinese ZTE Corp, with 13 percent, is subject to similar pressures and poorly placed to pick up the slack. The chief technology officer at Canada’s Telus has estimated that Huawei’s low-cost products have reduced global equipment prices by at least 15 percent.

Handing more market share to Ericsson and Nokia risks reversing that trend and means operators may cut investment in networks or pass on the cost to consumers. A more concentrated market also means that future Ericsson-style network outages at one supplier will affect a broader slice of the market. The global anti-Huawei push comes at a cost.

Breakingviews

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