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Why Nokia or Ericsson might be the West’s best bet against Huawei

  • History shows the US regulatory environment and the nature of American capital markets led to the downfall of the country’s home-grown telecoms equipment giant
  • Continental Europe provides a better environment for growth of telecoms equipment firms, with the Nordic companies offering West’s best alternative to Huawei

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Rajeev Suri, Nokia’s CEO, speaks at the 2018 Mobile World Congress in Barcelona. Photo: Reuters
The US has continued to pressure countries around the world not to use Huawei equipment in their 5G networks. When Secretary of State Mike Pompeo’s talking head is the US’ key competitive weapon against Huawei, something is not quite right.
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Two decades ago, Lucent, an American company, was once the world’s largest telecoms equipment company, until, a shadow of its former self, it was absorbed into Nokia. Still, Lucent’s fate was better than that of Canada’s Nortel, which went bankrupt in 2008. What went wrong?

While the US government is fighting Huawei today, earlier in the last century, it did the opposite – dismembering Western Electric, AT&T’s equipment arm, long before the break-up of AT&T. Its actions led to the creation of two Western Huaweis – Nortel and Alcatel – which became leading competitors of Lucent, the stand-alone American successor of Western Electric.

ITT, a US company which acquired Western Electric’s international operations in 1925, was a key telecoms equipment maker. In the 1960s, through leveraged buyouts, ITT diversified into a range of unrelated businesses, including the Sheraton Hotels chain. Once the largest shareholder of Ericsson, it sold its interests in the company in 1960.

In 1986, an overleveraged ITT sold its telecoms equipment businesses to a French company that would become Alcatel. Meanwhile, the sale of Northern Telecommunications, established by Western Electric to serve the Canadian market, to Bell Canada, resulted in the formation of Nortel.

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When Lucent went public in 1996, Alcatel was the world’s largest telecoms equipment company. But in 2006, a struggling Lucent merged with Alcatel; a decade later the combined entity was acquired by Nokia.
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