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FRIDAY, JULY 11, 2025
Fearing Huawei curbs, Deutsche Telekom tells Nokia to shape up

Tech

Reuters
07 February, 2020, 02:15 pm
Last modified: 07 February, 2020, 02:17 pm

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Fearing Huawei curbs, Deutsche Telekom tells Nokia to shape up

Reuters
07 February, 2020, 02:15 pm
Last modified: 07 February, 2020, 02:17 pm
 Signal strength of Deutsche Telekom 5G is displayed on a mobile device at the IFA consumer tech fair in Berlin, Germany, September 5, 2019. REUTERS/Hannibal Hanschke/File Photo
Signal strength of Deutsche Telekom 5G is displayed on a mobile device at the IFA consumer tech fair in Berlin, Germany, September 5, 2019. REUTERS/Hannibal Hanschke/File Photo

Deutsche Telekom has told supplier Nokia it must improve its products and service to win business installing the German group's 5G wireless networks in Europe, according to internal documents and a source with direct knowledge of the matter.

Europe's biggest telecoms operator has dropped Nokia as a provider of radio gear from all but one of its dozen markets in the region, according to the source and the documents - briefing notes for top Deutsche Telekom management reviewed by Reuters.

The documents - written by the vendor management team for internal meetings and talks with Nokia between July and November last year - also show the German group considered Nokia the worst performer among all suppliers in 5G tests and deployments.

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But faced with the threat of restrictions on China's Huawei - its dominant supplier of network equipment - Deutsche Telekom  has decided to give Nokia another chance to mend their relationship, according to the documents and the source.

A briefing note for a meeting between Deutsche Telekom managers and Nokia Chairman Risto Siilasmaa in mid-November said "assurances have been received" from the Finnish company, without giving details.

The clock is ticking. Deutsche Telekom team leaders are due to present an updated strategy for sourcing network gear from vendors to the board after the Mobile World Congress, an annual telecoms industry gathering in Barcelona at the end of this month, according to the documents and the source, who was not authorized to speak to the media and so requested anonymity.

Deutsche Telekom's willingness to give Nokia another hearing shows the difficulties mobile companies face over pressure from the United States on its allies to ban Huawei from their 5G networks. Washington alleges Huawei's equipment can be used by Beijing for spying - a charge the Chinese firm denies.

With Deutsche Telekom foreswearing new deals with Huawei, according to the documents, it is increasingly relying on the only other big telecoms supplier, Sweden's Ericsson, which is spreading its footprint in southeastern Europe.

The documents also provide a window into the troubles facing Nokia, which issued a profit warning last October that sent its shares down by a third. Nokia mainly blamed setbacks in sourcing new chipsets for 5G radio transmission systems.

Asked about relations with Nokia, Deutsche Telekom said it would not comment in detail about talks with vendors, but added Nokia was an important European producer of network equipment.

"As we have often said, we are pursuing a multi-vendor strategy in order not to rely on a single supplier," the German firm said. "This is a vital element of our security philosophy."

Asked about the criticisms in the Deutsche Telekom documents, Nokia CEO Rajeev Suri declined to comment on specifics but said its relationship with the German company was strong.

"We have a long and proud history with Deutsche Telekom - they are one of our most significant customers, both in Europe as well as the U.S.," he told Reuters after Nokia reported a surprise fourth-quarter profit on Thursday.

A Nokia spokesman declined further comment. 

'GEOPOLITICAL ISSUES'

Deutsche Telekom once relied equally on Huawei and Nokia for radio access network equipment - antennas and base stations that account for most of the cost of a mobile network - in Germany.

But in 2017 Nokia was dropped entirely from that market segment when Ericsson was handed a 30% share of Deutsche Telekom's spending on it, reports in the trade press said at the time. It was the first of several wins for Ericsson.

Three sources with direct knowledge of the matter said Deutsche Telekom reached an advanced stage in talks late last year to keep Huawei as its dominant supplier in Germany, with 70% of the investments in upgrading to super-fast 5G networks. 

Ericsson would keep its 30% share.

Deutsche Telekom then suspended vendor talks to await the outcome of a debate in Berlin over the security of critical national networks, where senior lawmakers from Chancellor Angela Merkel's conservative party back the U.S. call to bar Huawei.

Were Germany and other European countries to follow Britain's recent decision to cap Huawei's share of network spend at 35%, Deutsche Telekom would face serious challenges, the source with direct knowledge said.

Despite Deutsche Telekom's desire for multiple suppliers, however, Nokia faces a battle to win back the German group's trust, the documents show.

In an all-day meeting last July 11 at Deutsche Telekom's headquarters in Bonn, Nokia's CEO was to be told that its responsiveness and performance were still lower than those of its competitors, and that it "must step up", according to a briefing note prepared for Deutsche Telekom CEO Tim Hoettges.

Nokia's 5G product was inferior to all other suppliers, and negotiations were complex and drawn-out for every single project, the note stated.

Presented in bullet-point format or as slides, the notes provide high-level talking points for top bosses, but do not identify specific Nokia products or services.

While they are part of the cut and thrust of negotiations between buyers and sellers, the concerns raised appear to be backed up by Deutsche Telekom's recent dealings with Nokia.

The German group's annual purchases from Nokia across Europe and the United States fell by half to 1.5 billion euros ($1.7 billion) between 2016 and 2018, a presentation to the executive board in mid-October shows.

Late last year, Deutsche Telekom also dropped Nokia in Croatia and Greece, the source with direct knowledge said.

That left Poland as the last European country where Nokia is present, in the network shared by the local units of Deutsche Telekom and France's Orange, according to an undated strategic overview of the German group's vendors.

A 5G vendor decision in Poland is pending. A spokesman for Orange, which has picked Nokia and Ericsson to build its French 5G network, said the Polish tender was still open.

Nonetheless, on Oct. 15 - nine days before Nokia's profit warning - Deutsche Telekom's executive board backed a recommendation from team leaders to give Nokia another chance, the source with direct knowledge of the matter said.

"Deutsche Telekom needs Nokia as competition to Ericsson in case of geopolitical issues," the team leaders wrote in their presentation, in perhaps an oblique reference to Huawei.

South Korea's Samsung, a new entrant into the networks business, could only play a meaningful role in the medium term, they added. Samsung did not respond to requests for comment.

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