Huawei has most to lose as Vodafone kicks off 170,000-site tender

Down on revenues this year amid a weak telco appetite for network upgrades, kit vendors will be feeling a mixture of excitement and terror now that Vodafone has finally booked in its long-awaited mobile tender. The job includes equipping about 170,000 sites across various countries in Europe and Africa, giving Vodafone a huge network footprint compared with most telcos outside the mega markets of China and India. It will also involve e&, the UAE-based telco that has been slowly building a stake in Vodafone.

Those details emerged on Vodafone's third-quarter trading update this week, when CEO Margherita Della Valle confirmed the tender has been issued. "We have just started, for example, what is said to be the largest radio network tender in the world probably outside China, I would say, through our procurement process, and this is a case in which e& is going to join us so that we have better results for all," she told analysts in response to a question about the apportionment of costs between central functions and operating companies.

The revelation that Vodafone was planning such a big overhaul first came in 2019 courtesy of Yago Tenorio, Vodafone's head of network strategy. At the time, it was presented partly as an attempt to influence the 5G roadmap, and it seemed limited to Europe. Then came the COVID-19 pandemic followed by a supply chain crunch. The priorities seemed to change as 5G matured and Vodafone swung heavily behind open radio access network (RAN) technology, a concept aimed at allowing an operator to combine multiple vendors at the same mobile site.

But the tender was publicly resurrected last October when Tenorio told Light Reading – ahead of an announcement at the FYUZ industry event in Madrid – that it would land in early 2024. "We've publicly said our contract expires in March 2025 and we need to be ready for a new contract before that," he said at the time. "If you reverse engineer, it means the RFP [request for proposal] is in preparation and is going to hit the ground anytime between now and April 2024 at the latest."

Big role for open RAN

Tenorio's reference to "contract" suggests Vodafone has one giant global deal in place with a single supplier. The reality, of course, is that Vodafone has worked with a multitude of different vendors across its European and African markets. Yet the operator would presumably not be talking about its tender this way unless much of the RAN equipment were due for replacement starting in March 2025.

Since 2019, Vodafone has also made open RAN an even bigger commercial priority. Forced by the UK government to rip out RAN products supplied by Huawei, the operator aims to use open RAN at 2,500 mobile sites currently served by the controversial Chinese vendor. This would represent only about 14% of Vodafone's UK sites. Yet by 2030, it wants to see open RAN deployed across 30% of the entire European footprint, the company announced two years ago. "In Europe it's 100,000 sites and so we'll put that out to tender and our ambition is to reach 30% open RAN," said Tenorio in October.

In early 2021, under former CEO Nick Read, Vodafone also embarked on a major revamp of its technology and IT estate. Among other things, it has been replacing systems that cater to individual countries with tools and products that can be used or sold across the entire European footprint. "What we are doing is driving greater standardization across network and IT and digital," said Read in February 2021.

Given this revamp, a push for economies of scale through procurement and the nature of the upcoming tender, any decisions about network vendors could feasibly be more centralized and multinational than they once were. It is not inconceivable, for example, that Vodafone opts to buy RAN software for several countries from the same vendor. Germany's Deutsche Telekom already appears to have done a similar thing on open RAN, announcing Mavenir as a provider of massive MIMO radios for multiple European countries.

On the IT side, Vodafone also recently struck a multinational ten-year deal with Microsoft valued by the companies at about $1.5 billion. Today, Vodafone runs customer relationship management and other IT software on tens of thousands of x86 servers installed in leased facilities, but these applications will shift to the Azure public cloud under the Microsoft deal. "We have calculated an NPV [net present value] that is in the triple-digit-million [euro] range," said Luka Mucic, Vodafone's chief financial officer, on today's call with analysts.

Huawei may have the most to lose during the tender, considering Vodafone's heavy reliance on it and today's geopolitical climate. Unlike Ericsson and Nokia, its two big rivals, Huawei has sought no public accommodation with open RAN, perhaps partly because it is portrayed as the alternative that avoids a Nordic duopoly in countries where Huawei is banned. And according to research published by Strand Consult, Vodafone was using Huawei across about 60% of its European RAN footprint in the days of 4G. Outside the UK, moreover, the percentage does not seem to have changed much during the rollout of 5G so far.

That said, Vodafone has been more vociferous than many other telcos about the need to cultivate RAN alternatives to not only Chinese vendors, but also traditional European suppliers. And boosting competition is more important in the subsector for radio units than it is in either software or servers, Tenorio told Light Reading in October. "Radios attract more than 50% of the wallet share," he said.

Samsung on the up?

If the UK is any guide, Samsung will have a major role to play in a wider European rollout. The South Korean vendor is the main supplier on the UK project, contributing radio units as well as RAN software, and its technology is highly regarded by Vodafone's experts. While Japan's NEC is also down to supply radio units, the operator has yet to show these will run with Samsung's software in a commercial setting.

Despite the availability of new open RAN interfaces, pairing baseband software from one vendor with radio units from another still appears tricky. Adam Koeppe, the senior vice president of technology planning at US-based Verizon, told the SDxCentral website last month that "multivendor" open RAN remains unproven. A recently announced $14 billion "open RAN" contract between AT&T and Ericsson looks heavily reliant on the Swedish company for both radios and baseband units.

Patrick Lopez, the founder and CEO of Core Analysis, is not prepared to see it as an open RAN deal except at sites where AT&T is using Fujitsu's radio units instead of Ericsson's. "For me, only the Fujitsu deployment with Ericsson's CU DU [central unit, distributed unit]," he said on X (formerly Twitter), when discussing the categorization of the contract. "Ericsson's radio will have to integrate with third party vendor to count in my estimate."

The industry will be watching closely to see whether Vodafone mimics AT&T and Verizon, relying on the same vendor for baseband and radios at any given site, or if it attempts a more ambitious multivendor rollout. Because if open RAN ultimately means open interfaces accompanied by single-vendor deals, it will not have done what was promised.