Ericsson in Chorus Crown fibre coup

UPDATED: Sweden’s Ericsson has won the contract to supply Chorus with fibre optic cable in the $1.35 billion ultrafast (UFB) rollout.

Chorus (due to be spun-off from Telecom by November 30), won 74% of the UFB project by premise.

Sydney-based telecommunications market analyst Paul Budde told NBR the deal would be worth "hundreds of millions" to the Swedish company.

The Ericsson win is a blow to Telecom’s incumbent, long-time telecommunications infrastructure partner, Alcatel Lucent (questioned by NBR at the time, Chorus was noticeably coy when questioned about the scope of Telecom’s recently renewed partnership with the Franco-American company).

It’s also a set-back for China’s Huawei, which has been pushing hard for Crown fibre business, and last year was trumpeted by a Shanghai Expo-awed John Key as a potential Crown fibre supplier.

Alcatel Lucent could get layer 2
Chorus, it seems, is striking its own path - but Alcatel-Lucent could still see some of the action.

A Chorus spokesman told NBR the Ericsson contract is for "the supply of air-blown fibre optic-cable systems and supporting tools, not layer 2 electronics." Layer 2 electronics - which "light" fibre and make it ready to deliver services - are the commercially juiciest element of the network.

The recently renewed Alcatel Lucent-Telecom parnership "contains provisions allowing it to be duplicated or assigned to Chorus once the demerger from Telecom has been completed," the spokesman said.

So will the layer 2 contract go to Alcatel Lucent?

"We’re still working through the supply arrangements for layer 2 technology," the Chorus spokesman said. "We have an existing relationship with Alcatel Lucent and they could [NBR's italics] be one of our suppliers following the demerger of Chorus from Telecom."

A comeback
The deal announced today represents something of a comeback in the New Zealand market for Ericsson.

While the Swedish company has enjoyed strong business across the Tasman, here Telecom has partnered with Alcatel-Lucent for the bulk of its network infrastructure business over the past few years; Vodafone primarily with Nokia Siemens and 2degrees primarily with Huawei.

It may also be a sign that Ericsson’s hard-fought lobbying efforts have had some impact. Over the past 24 months, reps for the company have made repeated visits, meeting with the MED and various companies vying for Crown fibre contracts.

In particular, the Swedes warned against the risks of creating "25 hobby networks" that "floated in space."

Ericsson lobbied Communications Minister Steven Joyce, and others, for a single national network, driven by a single public-private partnership - not unlike the arrangement that emerged as Chorus landed the lion's share of the UFB, underpinned by $929 million in the form of an interest-free long term government loan and non-voting equity.

Supplier contracts have yet to announced for the remaining UFB winners - Northpower, Wel Networks and Enable, who will be responsible for around 26% of the rollout (by premise).

Enable's UFB contract (for Christchurch) includes a provision for a possible 50:50 joint venture with Chorus.