Huawei beats Ericsson to Tele2/Telenor 4G order

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* 4G network to be commercially launched in 2010

* Blow for Ericsson in home market

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STOCKHOLM, Dec 18 - Nordic telecoms operators Tele2 (TEL2b.ST) and Telenor (TEL.OL) picked China's Huawei [HWT.UL] to supply their joint 4G network in Sweden, shutting out Ericsson (ERICb.ST) in its home market, Tele2 said.

Carriers are expected to spend billions of euros over the coming years on fourth generation LTE (Long Term Evolution) networks to meet surging demand for mobile data traffic and provide services such mobile TV and gaming.

Due to the costs, many are seen opting to share networks adding to competitive pressure among telecoms gear suppliers already feeling the pinch from the economic downturn.

Huawei is contributing high technical competence and cost effectiveness, both are key in our extensive investment in the build out of a nationwide 4G network, Net4Mobility, the company jointly owned by Sweden's Tele2 and Norway's Telenor, said in a statement on Friday.

Tele2 and Telenor plan to launch commercially in 2010 and cover 99 percent of Sweden's population with high-speed 4G services by 2013.

They gave no financial details of the deal.

The build-out also includes an increase of 30-50 percent in the number of base stations for voice traffic over 2G/GSM, leading to better ... coverage over the whole country, the companies said.

ERICSSON BLOW

The Huawei deal is a blow to Ericsson, the world's biggest mobile telecoms equipment firm.

Gear makers generally have been hit by recent economic upheavals, which have led operators to cut capital expenditure.

Ericsson, Nokia Siemens Networks [NSN.UL] and Alcatel-Lucent (ALUA.PA) also face increasing competition from Chinese vendors who have undercut prices to build market share.

Huawei's problem has been that they have been big in China but have had a tough time entering other markets, analyst Greger Johansson at Nordic research firm Redeye said.

However, the Chinese firm has been very competent and very aggressive, and they have definitely sailed up as Ericsson's worst competitor during the last 2-3 years, he added.

This week, the Nordic region's biggest telecoms operator, TeliaSonera (TLSN.ST), launched the world's first commercial mobile LTE services in Olso and Stockholm.

Ericsson is supplying Telia's Stockholm network, but Huawei was chosen for Oslo. [ID:nLDE5BD1NK]

Ericsson, which last year paid $1.1 billion for bankrupt Nortel's key CDMA and LTE wireless technologies, said it was disappointed it did not win the contract.

We went as low in price as we could in the negotiations, but it wasn't enough, the firm said in a statement.

Johansson at Redeye said the Tele2 and Telenor rollout would be modest to begin with, meaning Huawei could make a cut-price offer.

It's easy enough to compete on price on small initial orders but what happens to the price when the volumes grow? It's hard to imagine that Huawei would have that much lower production costs than Ericsson on similar products, he said.

Ericsson, whose shares were trading 0.8 percent higher by 1125 GMT, has previously won LTE contracts with Verizon (VZ.N) and Metro PCS and Japan's NTT DoCoMo (9437.T). (Editing by Simon Jessop and Jon Loades-Carter)

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