Vodafone has selected Nokia for a contract worth up to €100 million to build elements of its third-generation (3G) mobile phone network. The phone company signed a letter of intent on Monday with Nokia after its system was chosen over rival Ericsson.
The decision is seen as a significant setback for Ericsson. Certain individuals familiar with the scene believe up to 100 jobs in its training and account management division may be at risk due to its failure to secure the contract.
A final contract has not yet been signed with Nokia but the company is expected to build base stations and core exchanges for the €1 billion system. Nokia built elements of the precursor network to 3G, known as GPRS or 2½G, which cost about €100 million.
But Ericsson was regarded as a very strong candidate on the basis that it built large parts of the earlier 2G network for Eircell, the Eircom subsidiary acquired by Vodafone in 2000. Vodafone is the biggest mobile phone operator in the State, with more than one million subscribers.
Vodafone's spokeswoman said: "Nokia was chosen after an open competitive tender process. It had a superior solution at a better price."
No-one was available at Ericsson yesterday to respond to queries. The contract it failed to secure is believed to have been crucial to plans for the business in the medium term.
The Swedish company employs some 1,800 people in the Republic, but is believed to have reduced its staff by about 200 amid difficult conditions in the past year.
The loss-making company concluded a $3.2 billion (€3.26 billion) rights issue earlier this month. In a global restructuring process already under way, it wants to reduce its total staff to 60,000 by the end of next year from 107,000 in 2001.
Vodafone paid €44.4 million to the telecoms regulator earlier this month for its 3G licence. The payment is the first tranche of a €114 million licence fee due over 10 years. It followed a one-month review in which Vodafone evaluated whether it should invest in the technology in the Republic.
Telecom groups invested heavily in the purchase of licences from states during the tech boom around 2000, but high roll-out costs have led many analysts to question the viability of the technology.
The other licence holders in the State are the Hong Kong-based firm, Hutchison Whampoa and O2, the former Digifone now owned by British Telecom.
Attempts to reach a Nokia spokesman were not successful.
