Ericsson wins King Abdullah Economic City contract ahead of Huawei and Cisco

Ericsson has beaten off stiff competition from Huawei and Cisco to win the first phase of the communications contract for King Abdullah Economic City (KAEC), sources close to the contract award have told Comm. KAEC is one of Saudi Arabia’s most ambitious development projects to date.

Earlier this month Emaar, the Tadawul-listed company developing KAEC, celebrated the achievement of SAR1 billion (US$267 million) from sales of residential units within the first phase of the mega-project.

The contract, estimated to be worth US$25 million, covers the development and implementation of a metropolitan telecommunications network, and the first phase of network infrastructure development was widely expected to be won by Cisco Systems. The US IP network provider had signed a memorandum of understanding with Emaar, the developer of KAEC, as recently as January to undertake the design of the city’s network infrastructure.

According to one insider involved in the KAEC project, the award of the contract was based purely on technical merit rather than political considerations. “Ericsson provided the best solution, and Emaar went with them. Cisco wasn’t in the running as far as they were concerned. In fact, Huawei were the second choice.”

Whilst the size of the deal may not prove significant, the news has already proved damaging to Cisco’s Smart Cities team. Shortly after Emaar announced that Ericsson had won the deal, Caspar Herzberg, Cisco’s head of strategy for its Smart Cities Unit is reported to have sent out an email to EMEA management explaining the reasons behind the loss and assuring corporate management that the other economic cities would continue to support Cisco.

With a forecast of just under US$100 million dollars for FY09, Cisco’s Smart Cities team and Herzberg may be looking to review their numbers going forward, especially with reports that one or more of the economic cities may be delayed for financial reasons.