Mobile telecommunications operators in Europe are beginning to consider Samsung Electronics as the supplier for their fledgling 5G systems, in place of Huawei.
Right after Samsung sealed a $6 billion deal with Verizon USA in September, Executives at both Spain’s Telefonica and France’s Orange have both held talks with the South Korean firm.
Nearly half of the European 4G network is made of Huawei’s hardware, setting a foundation for super-fast 5G, alongside that of Nokia and Ericsson.
European operators, however, are under pressure from the USA to boycott the Chinese giant for 5G systems that could, in future, be supporting services in telecommunication, medicine, as well as factory automation.
The US government says it suspect that Huawei could be spying for the Chinese government. Huawei has repeatedly denied this.
One problem Samsung faces is that operators have worry that its products will not be compatible with the existing 4G networks built by Huawei, and that it will cost the companies hundreds of millions of dollars to replace the existing tech, rather than simply upgrading them.
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“They need to be extremely competitive. The cost of swapping the 4G is an extra cost for Samsung so, even if you are inviting them, it is difficult for them to be competitive,” said Enrique Blanco – Telefonica CTO.
Samsung, through a spokesperson, told Reuters that the idea that its equipment was not compatible with existing infrastructure was a misconception. The spokesperson however, did not provide technical details.
Orange Chief Technology and Innovation Officer, Michael Trabbia, also said that Orange was considering switching over to Samsung in Europe. This leaves Poland and Romania as the only two European countries where Orange has not yet chosen an equipment maker.
“We can see that Samsung is becoming more and more credible on 4G and 5G,” Trabbia said. But he said Orange had tested both Samsung and Huawei equipment before opting for Nokia and Ericsson for its 5G systems in France.
Reuters reports that European operators have already spent billions of euros to roll out fibre optic networks in Europe, noting that 5G would drain their pockets even more. The industry body GSMA expects $1.14 trillion to be invested globally over five years, with 78% of it spent on 5G.
Swapping telecommunications hardware is quite expensive. Analysts estimated how much it cost Bell Canada to switch their hardware from Huawei, and pegged it at about $200 million.
Some of Europe’s big telecom operators are skeptical about Samsung’s competitiveness in the short term. Analysts also agree with the skepticism, noting that Samsung will need to do more to compete with Nokia and Ericsson.
“If they get a deal from Deutsche Telekom or Telefonica, they need a big organisation to build and support the infrastructure. They can’t just send their offers to European operators and then start building networks here,” Kimmo Stenvall, an analyst at OP Markets Helsinki said, and Reuters reports.
Samsung claims it has strong team and research facilities in Europe, but analysts said big deals usually presuppose years of groundwork in forming relationships with operators and testing networks.