Ericsson ‘wins back deal’ after Wind Tre switches order from ZTE

Ericsson ‘wins back deal’ after Wind Tre switches order from ZTE

Ericsson is the first telecoms vendor to benefit from rival company ZTE’s dispute with the US by capturing a €600 million contract.

At the same time ZTE has appointed a new CEO, CFO and CTO and other senior executives, conforming with a deal with the US to replace existing management.

The new CEO, said Hong Kong newspaper South China Morning Post (SCMP) this morning, is Xu Ziyang, previously president of ZTE’s telecom cloud and core network product line. Xu is a previous CEO of ZTE’s operation in Germany, where E-Plus – then owned by KPN – was a customer.

The CFO is Li Ying, currently a vice-president in the finance department, says the SCMP. Wang Xiyu is the CTO. ZTE has not yet made any announcement about these or other changes of senior management.

A complete change in management was part of the agreement between ZTE and the US Department of Commerce (DoC), which found that the company had not stuck to a previous agreement after the US uncovered evidence that it smuggled US hardware and software to Iran and North Korea.

The US threatened to ban all use by ZTE of US-licensed technology, but ZTE agreed to a $2.3 billion fine as well as the management changes.

A last-minute attempt by the US Congress to stop the settlement fizzled out after politicians agreed simply to ban US government agencies from buying Huawei and ZTE phones and equipment – something that was never likely.

But outside the US the effects of the ban and the uncertainty about ZTE’s security have begun. Italian mobile operator Wind Tre is understood to have switched an order from the Chinese vendor to the Swedish company – though neither Ericsson nor Wind Tre are commenting.

The news emerged as Hong Kong-based CK Hutchison, which owns the worldwide Three mobile brand, agreed to buy out Veon’s 50% stake in Wind Tre for $2.87 billion

ZTE won the Wind Tre deal in December 2016 in what was seen at the time as a significant blow to Ericsson, which had also been competing for the order – as had Huawei and Nokia. ZTE said at the time that the order would help to make it the company’s European hub.

Ericsson’s loss came at a particularly bad time for the Swedish company, which had just fired CEO Hans Vestberg because of falling performance and replaced him with Börje Ekholm. If Ericsson has regained the Wind Tre business, it will be a significant win for Ekholm. He will be giving Ericsson’s second quarter report on 18 July – so may be able to comment on it by then.

However, other deals may be under consideration as operators ponder the long-term stability of ZTE after two brushes with the DoC in two years – the second of which nearly closed down the company.

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