A Reuters report done by Eric Auchard has illustrated the impact on several global telecom operators including VEON and Telefonica due to the US ban on China’s ZTE.
ZTE is the fourth largest telecom equipment maker behind China’s Huawei, Finland’s Nokia and Sweden’s Ericsson. ZTE generates majority of its revenue from selling telecom gear to telecom operators worldwide.
The US-ban blocked ZTE from sourcing components from US-based technology companies and using it in its telecom equipment. ZTE, in fact, stopped telecom networking and phone business for more than three months. Recently, ZTE changed its CEO, chairman, entire board and top management dancing to the tunes of US administration.
Wireless carriers worldwide are now forced to consider broadening their supply networks, the report said.
Russian and emerging markets mobile operator Veon suffered launch delays at its Italian joint venture and in Ukraine, near network outages in Bangladesh, and lesser disruptions at its Pakistan operations.
The Amsterdam-based operator has decided to second source everything to avoid issues that impacted three of four of its telecom markets. The strategy of Veon is to reduce dependence on any one supplier of network gear.
Italian mobile operator Wind Tre, which had a $1.17 billion telecom network contract with ZTE to upgrade radio equipment, faced the heat. ZTE dropped more than half of the balance of the telecom gear contract. Wind Tre will use gear from network supplier Ericsson instead.
Nokia and Huawei are also looking telecom contracts with mobile operators who are willing to scrap deals with ZTE. Telecom gear manufacturing companies such as Ericsson, Nokia, Huawei and Samsung are yet to report any wins following the ZTE issue.
Mobile operators may start using multiple vendors to avoid being stuck with a supplier that comes under trade sanctions or suffers other extended disruptions.
“Many supplier strategies will be reviewed,” said Bengt Nordstrom, a telecoms industry consultant based in Sweden who advises operators on equipment purchasing strategies.
“Wind Tre was the first example so far. This is a wake-up call to the industry that if you have a single vendor dominating your network supply chain – ZTE for now, but other vendors eventually – you are leaving yourself exposed.”
Veon’s Ukrainian unit, Kyivstar, the largest mobile operator in that country, has postponed its introduction of 4G mobile services in April because of the ZTE ban. Kyivstar lost ground to competitors.
Kyivstar’s two rivals are Vodafone Ukraine, owned by Russia’s MTS / Sistema and UK-based Vodafone; and Lifecell, a unit of Turkcell of Turkey.
Kyivstar launched its 4G service in July, more than two months behind schedule, by using a part of the network that didn’t depend on ZTE.
Veon’s Bangalink unit narrowly averted network blackouts in Bangladesh. There was an issue with Bangladeshi network upgrades that really went down to the wire.
GSMA negotiated a one-month reprieve with the Commerce Department that allowed Bangalink and other ZTE customers to engage in “essential transactions” that allowed existing networks and handsets to keep working.
Spanish telecom operator Telefonica relied on technical workarounds during the ban, but still canceled some ZTE contracts. Telefonica minimized disruptions because contracts with ZTE accounted for less than 5 percent of the telecom giant’s equipment spending.
There is no information about the impact on China Mobile and MTN, two other major ZTE customers. ZTE also has significant presence in India.