Ericsson jams the connection

The vendor assesses the risks of working with Russian mobile operators.
Ericsson, the world's largest manufacturer of equipment for mobile communication networks, has stopped deliveries to Russia. The company is urgently assessing how its business may be affected by the sanctions imposed on Russia by Western countries due to the military operation in Ukraine. The share of Ericsson in the Russian telecommunications market is, according to Kommersant's sources, up to 20%. The place of the European manufacturer can be taken by the Chinese Huawei and ZTE, experts say. But in the absence of competition, they are likely to raise prices.

The Swedish manufacturer of telecommunications equipment Ericsson has temporarily stopped deliveries of equipment to Russia, Reuters reported, citing an internal letter from the company's CEO Borje Ekholm. The company assesses the impact of technological sanctions imposed by the EU and the US due to the entry of Russian troops into Ukraine. Kommersant requested the Russian representative office of Ericsson.

Ericsson works with the largest telecom operators in Russia. In March 2020, MTS invested 10 billion rubles. in upgrading its network to the 5G standard in Central Russia based on Ericsson equipment. Tele2 in May 2021 agreed to purchase 50,000 base stations from a vendor to develop the network in 27 regions of Russia.

Kommersant's source in the Russian telecom market estimates Ericsson's share in the market for equipment for communication networks at the moment at about 20%.

MegaFon reported that Ericsson's decision "will not affect the company": "In the near future we did not plan any major joint projects." MTS, Rostelecom, Vimpelcom and Tele2 declined to comment. Kommersant's source in one of the companies notes that so far we are talking about the suspension of supplies, and not about their complete cessation.

On February 24, in connection with the Russian military operation in Ukraine, the United States announced a number of new restrictions, including on the supply of telecommunications equipment. Civil telecommunications and consumer electronics are partially exempted from sanctions. Lawyers interviewed by Kommersant warned that companies themselves could begin to cut supplies until they figure out the nuances of the restrictions. Since then, deliveries to Russia have been suspended by Dell, Intel and AMD.

All cellular networks operating in Russia operate on Ericsson, Nokia and Huawei equipment; there is no serial domestic equipment on the market.

Spektr, which is part of Rostec, is developing its equipment, it is planned to be presented by 2024; in February 2021, the Ministry of Digital Development proposed to increase the salaries of Spektr employees. Remuneration will be formed from a subsidy from the federal budget and the state corporation's own funds, Rostec explained.

The lack of new deliveries of Ericsson equipment will make it difficult both to continue building coverage and strengthen cellular networks in Russia, and to maintain the operability of 2G, 3G, 4G equipment already deployed over decades, Alexey Boyko, an analyst at MForum Analytics, notes. In his opinion, the equipment of a Western vendor will have to be replaced by Huawei or ZTE in the future. “This will lead to new, practically unproductive investments by operators and threatens at least significant delays in the development of cellular networks in Russia,” Aleksey Boyko warns. In addition, he admits, Chinese vendors, in the absence of competition, will be able to raise prices for operators.

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