Ericsson Is Surprisingly Cheapest Vendor in Huawei's China

(Bloomberg) -- In China, home to Huawei Technologies Co. and ZTE Corp., it’s cheaper to buy network equipment from Sweden’s Ericsson AB.

According to a tender by China Unicom Hong Kong Ltd.’s parent to purchase some 4G base stations, Ericsson offered to sell its products for 21 billion yuan ($3.1 billion), or 25 percent below Huawei and 22 percent lower than ZTE’s offer. Nokia Oyj asked for the highest price at 34.7 billion yuan.

It’s rare for prices of telecommunications equipment to be disclosed publicly, so it’s unclear whether these prices reflect what these companies charge worldwide, but the figures stood out to Edison Lee, an analyst at Jefferies Hong Kong Ltd. In particular, the prices indicate ZTE no longer competes on price alone because the quality of its products have improved, Lee said in a note to clients on Wednesday.

Huawei, which has been under fire from the U.S. and its allies over concerns its products may carry security risks, doesn’t face that worry at home. The company, which has repeatedly denied allegations that the Chinese government could use its equipment for spying, emerged as the winner of the Unicom auction.

Ericsson reported rising sales in the fourth quarter in China, boosted in part by a telecom contract that had been delayed from previous quarters. The Swedish company gets about 10 percent of its revenue from Northeast Asia, a market area that also includes Japan.

(Updates with Ericsson sales in final paragraph.)

--With assistance from Kim Robert McLaughlin.

To contact the reporter on this story: Davy Zhu in Beijing at dzhu61@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Dave McCombs

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