Beeline received a batch of equipment from Huawei

VimpelCom received a batch of telecommunications equipment from HUAWEI. The delivery took place under a previously concluded contract, new ones have not yet been approved,

In mid-April, VimpelCom (Beeline brand) received a large batch of equipment from the Chinese Huawei, several sources in the telecommunications market told RBC. According to RBC's interlocutor familiar with the terms of the contract, the cost of this batch amounted to about $15 million.

According to two sources, negotiations for the supply were long: the contract was concluded before February 24, but the fulfillment of obligations had to take place at the time of the imposition of sanctions against RUSSIA, so the question arose about the possibility of its completion.

After Russia launched a military operation in Ukraine at the end of February, a number of countries imposed sanctions . Particularly the usabanned high-tech exports to Russia for the defense, aerospace and shipbuilding industries and limited the supply of semiconductors, computers, telecommunications and information security equipment, lasers and sensors to special licenses. On February 25, the Bureau of Industry and Security of the US Department of Commerce issued a clarification that indicated that an exception to this rule would be made for applications to EXPORT, re-export, or transfer goods to maintain civilian telecommunications infrastructure. However, the decision will be made on a case-by-case basis, depending on whether such a supply would benefit the Russian government or the defense sector.

FORBES learned about sending employees of the Russian office of Huawei Business on vacation

On April 8, the EU adopted the fifth package of anti-Russian sanctions, which imposed a ban on the supply to Russia of technologies intended for civilian communication networks of organizations where the state owns 50% or more.

Against the background of these measures, a number of major suppliers of telecommunications equipment have announced the suspension of work in Russia or the withdrawal from the market. Huawei did not make such statements. But, according to one of RBC's sources in the market, the company limited a special configurator for Russian customers - a platform that was used to calculate specifications during purchases, which made it difficult to purchase equipment. Another RBC source in one of Huawei's partner companies explained that the Chinese manufacturer is now "working out contracts that were concluded before the introduction of a package of sanctions, but does not conclude new ones." “Sanction requirements greatly affect what Huawei can sell in Russia, and in order not to mislead partners, the configurator was closed, which now actually incorrectly reflects the selection of solutions,” he said.

After the release of the material, a VimpelCom representative said that “the contract for the supply of telecommunications equipment with Huawei was signed long before the introduction of US restrictions on the supply of this type of product to Russia,” and it itself occurred before March 26 “in strict accordance with the requirements of the applicable such transactions of legislation and contractual documentation”. A Huawei spokesperson declined to comment.

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In early April, Izvestia, citing sources, reported that Huawei had stopped entering into new contracts for the supply of network equipment to Russian operators in March. Later, Forbes magazine, citing its sources, wrote that Huawei “for fear of secondary sanctions, suspended all orders in Russia” and sent some employees on a month's vacation.

Earlier, TASS wrote that Veon CEO (owns VimpelCom) Kaan Terzioglu said in a letter to shareholders that Beeline was trying to solve the problems of component availability on the market by “cooperating with other major domestic telecom operators, building new supply chains and introducing sourcing [flexible process of finding new solutions]. A RBC source close to VimpelCom says that now “the network is one of the most stable among the four operators,” and in connection with investments in its modernization in 2020-2021, more than 100 billion rubles. the need for equipment is closed by the end of the year.

What the manufacturers said

Swedish Ericsson has suspended operations indefinitely, its employees have been sent on paid leave. The company has set aside SEK 900 million (RUB 7.68 billion) for asset impairment and other "exceptional expenses," its first-quarter report said. At the same time, on April 14, during a conference call with investors, Ericsson CEO Berje Ekholm said that "the company is aware of the importance of maintaining Internet access for Russians."

Ericsson announced the suspension of business in Russia Business

The Finnish manufacturer Nokia announced the suspension of deliveries and the transfer of research activities outside of Russia. As the HEAD of the company, Pekka Lundmark, told REUTERS, they see "no opportunity to continue [business] in the country under the current circumstances."

Representatives of MegaFon and Rostelecom declined to comment. The representative of MTS only said that "the company is making every effort so that the announced restrictions do not affect the quality of services provided, their plans for the development and modernization of networks."

How supply chain issues can affect communications

As a source in one of the foreign vendors told RBC, if earlier it was impossible to supply equipment to companies that fell under sanctions, then from the end of February the ban applies to any device where more than 25% of American components are present, and we are not talking about the aggregate share. That is, if any part in a Chinese base station is made using American technologies or programs, or if this station consists of more than 25% of US-made parts, then a ban on its supply applies. “It gets ridiculous when the Russian “daughter” of a foreign company that provides services to various international players cannot receive equipment,” the source said. According to him, the requirements for obtaining licenses are not fully formulated, the criteria are unclear,

Nokia will leave Russia Business

“Russian operators will live quietly without supplies of equipment for a year or two, the quality of communication may fall, but since it was very good initially, this drop will not be critical. Foreign vendors do not want to lose the Russian market, but they will not take risks because of it - there is a very small volume here, and in case of violation of sanctions, there is a risk of being banned from working in other, more attractive markets or [one of the world's largest chip manufacturers] will be refused TSMC from the supply of components, ”the interlocutor of RBC points out. For example, Ericsson cited data that last year its sales in Russia amounted to 4.1 billion Swedish kronor (35.2 billion rubles at the weighted average rate for that period), or 1.7% of the company's total sales.

Alexander Sivolobov, Deputy Head of the Competence Center of the National Technology Initiative based on Skoltech for wireless communications and the Internet of Things, estimated Huawei's share in the Russian telecom equipment market at about 40%, Nokia at 20–25%, and Ericsson at 30–35% . In his opinion, Nokia, Ericsson or Huawei “may well replace each other if necessary”, therefore, even “if at least one of them remains on the Russian market, there will be no problems on the technical side.” At the same time, "the cost of replacing all network equipment from one manufacturer to another will be quite impressive." “Now all companies are afraid that their business will suffer because of the imposed sanctions, therefore they are extremely stingy with statements in public. Foreign manufacturers risk billions in fines and prison terms for employees, so they are understandable.

Konstantin Ankilov, CEO of TMT Consulting, also estimated Huawei's share at 40% and also believes that it is possible to replace all telecom equipment with one vendor, but this will require "large investments." Such cases have already been in Russia, but on the scale of macroregions, he pointed out. According to the expert's forecast, it may take 5-7 years to completely replace all telecom equipment for one manufacturer in Russia. For example, the British Telecom Group plans to replace Huawei equipment in seven years, but the reality could be longer.