Ericsson AB (ERICB) and Nokia Siemens Networks urged the European Union to back off from its threat of imposing tariffs on Chinese-made mobile-telecommunications equipment, throwing support behind some of their biggest rivals in the region.
The European Commission said yesterday it was prepared to probe possible Chinese subsidies to network makers such as Huawei Technologies Co. and ZTE Corp. (000063) and the possible sale of equipment in the EU below cost. The inquiries would cover EU imports of more than 1 billion euros ($1.3 billion) a year and determine whether these shipments unfairly harmed European manufacturers.
“Ericsson does not support this move by the Commission,” said Ulf Pehrsson, head of government and industry relations at the Stockholm-based company, the world’s largest maker of wireless networks. “We don’t believe in this type of unilateral measure. Our policy is for open, free and unrestricted trade and global supply chains.”
The threat of European tariffs against China’s manufacturers highlights the EU’s growing concern about Chinese dominance of markets in Europe and its readiness to make imports more expensive in a bid to aid domestic competitors. The EU is the biggest export market for China, which is the bloc’s second-largest trading partner, after the U.S.
Yet, that push isn’t garnering overt support from Europe’s biggest equipment makers because they are as concerned about generating sales from the booming Chinese market as much as fending off price competition in their home countries, where phone carriers from Telecom Italia SpA (TIT) to Royal KPN NV are struggling to cut debt and to finance network expansion.
“This is the first time the EU has initiated this type of an investigation without a complaint from the vendors,” Dai Shu, a Shenzhen-based spokesman for ZTE, said in a phone interview today. “It’s kind of weird. There are no specific vendors who initiated these allegations.”
As ZTE hasn’t received a formal notice from the EU, the company isn’t able to do a detailed analysis of the business impact of any tariffs, he said. ZTE’s share of Europe’s infrastructure market is “very small” and the company denies it receives subsidies or engages in dumping, he said.
China accounted for 5.9 percent of Ericsson’s sales last year and Alcatel-Lucent SA made 7.6 percent, data compiled by Bloomberg showed. Nokia Siemens made 9.6 percent from the greater China region, the company said in its annual report. The term greater China typically refers to the region that comprises mainland China, Hong Kong, Macau and Taiwan.
China is evaluating bids for the rollout of high-speed fourth-generation mobile networks, and western gearmakers are hoping to get a share of the contracts.
“China is a major market for all the infrastructure vendors, so there will be great interest in minimizing potential impact on their opportunities in China,” said Susan Welsh de Grimaldo, director of mobile broadband at Strategy Analytics in Newton, Massachusetts.
Huawei, seeking to accelerate growth in Europe, said last month it plans to hire 5,500 people in the region over the next five years, predicting the need for faster services and cheaper smartphones will drive demand in Europe. Nokia Siemens, Ericsson and Alcatel-Lucent have announced more than 24,000 job cuts in total since 2011.
“We absolutely oppose any efforts to restrict free trade and erect trade barriers of any kind and have urged the Commission to refrain from taking such steps,” said Barry French, a spokesman at Nokia Siemens, the venture between Nokia Oyj (NOK1V) and Siemens AG. (SIE) “We have made that position clear to the Commission both verbally and in writing.”
Simon Poulter, a spokesman for Paris-based Alcatel-Lucent, declined to comment on the EU initiative.
Ericsson shares slipped 1.1 percent to 82.10 kronor at 9:32 a.m. in Stockholm, paring their gain this year to 26 percent. Nokia rose 1 percent in Helsinki, Siemens fell 0.6 percent in Frankfurt, and Alcatel-Lucent increased 0.8 percent on the Paris exchange.
U.S. industry has expressed similar concerns about a backlash from China. In an April 4 letter to Congress, groups including the U.S. Chamber of Commerce and the Telecommunications Industry Association wrote they feared a rule that would make it more difficult for government departments to acquire technologies from China might cause retaliation against U.S. vendors “by enacting a similar policy for screening IT system purchases in China.”
“If the Europeans were to act against the Chinese vendors, they can expect retaliation against European companies in China,” said Simon Leopold, an analyst at Raymond James & Associates in New York.
In an e-mailed statement, Shenzhen-based Huawei said the company is disappointed with the anti-dumping and anti-subsidy investigations against Chinese vendors. In Europe and in all markets, Huawei “always plays fair” and wins business and trust from customers “through innovative technology and quality service,” rather than via pricing or subsidies, it said.
To contact the editor responsible for this story: Kenneth Wong at email@example.com