Deutsche Telekom rates Nokia as the worst performer in 5G

Deutsche Telekom has considered Nokia as the worst performer among all suppliers in 5G tests and deployments, Reuters reported citing an internal document.

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Deutsche Telekom has also told Finland-based Nokia that it must improve its products and service to win deal from the German group’s 5G wireless networks in Europe, according to internal documents.

The development assumes significance because Nokia and Ericsson are trying to cash in on the opportunities arising from the possible ban on Huawei network in the United States and allies.

Nokia recently claimed that it has won 66 5G commercial deals and it is present in 19 live networks operated by 5G service providers.

Europe’s biggest telecoms operator has already 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.
Deutsche Telekom's European Vendor MapDeutsche Telekom has decided to give Nokia another chance to rework their relationship in the wake of the threat of restrictions on China’s Huawei – its dominant supplier of network equipment. Deutsche Telekom is yet to decide on the supplier for the 5G network in Germany and other countries.

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.

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 in Barcelona at the end of this month.

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.

“We are pursuing a multi-vendor strategy in order not to rely on a single supplier. This is a vital element of our security philosophy,” Deutsche Telekom said.

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 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.

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.

Deutsche Telekom in 2017 dropped Nokia entirely from that market segment when Ericsson was handed a 30 percent share of Deutsche Telekom’s spending on it, reports in the trade press said at the time.

Deutsche Telekom reached an advanced stage in talks late last year to keep Huawei as its dominant supplier in Germany, with 70 percent of the investments in upgrading to super-fast 5G networks. Ericsson would keep its 30 percent share.

Deutsche Telekom then suspended vendor talks to await the outcome of a debate in Berlin over the security of critical national networks.

If Germany and other European countries to follow Britain’s recent decision to cap Huawei’s share of network spend at 35 percent, Deutsche Telekom would face serious challenges, the report said.

Both BT and Vodafone Group earlier said they would spend more because they need to remove Huawei from their core networks.

Despite Deutsche Telekom’s desire for multiple suppliers, 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.

The German group’s annual purchases from Nokia across Europe and the United States fell by half to 1.5 billion euros or $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.

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.

Comments from Deutsche Telekom and Nokia

Deutsche Telekom said it will not comment on individual contractual relationships and strategic purchasing decisions.

“Nokia is of strategic importance to Deutsche Telekom. Deutsche Telekom is pursuing a multi-vendor strategy so that we are not dependent on just one supplier. This is an elementary part of our security philosophy,” said Claudia Nemat, board member Technology & Innovation, Deutsche Telekom.

Deutsche Telekom in 2019 made steps together with Nokia to make Deutsche Telekom’s networks evolve towards 5G readiness, including all network domains, from radio and fixed access to transport and core, and continue to do so in 2020 and onwards.

“We have been a long-term partner of Deutsche Telekom and have been proud to work with them extensively over the years, providing leading network technology and services. We continue to work extensively with Deutsche Telekom,” said Federico Guillen, president of Customer Operations, EMEA & APAC, Nokia.

“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 005930.KS, 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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