Eventually, however, ERA took 30 percent of the US mobile market and could also describe itself as the only supplier of complete mobile systems for every standard. This helped ERA improve its footing within the parent company in spite of all the obstructions.
The fact that the Americans had at last got AMPS working decided the British choice of system. Here too, the entrepreneurial Jan Stenbeck was involved. In the summer of 1982, Gerry Whent, CEO of British military technology company Racal Radio, received a surprise visit from Stenbeck, an unknown Scandinavian. He proposed that Racal together with his own American mobile telephone company Millicom should apply for one of the two mobile telephony licenses that were coming up in the UK. The other was reserved for British Telecom, which founded the mobile operator Cellnet in partnership with Securicor.
Whent was skeptical to begin with, but allowed himself to be persuaded. Stenbeck wanted a 40 percent holding in the joint company but had to make do with 15 percent because the British government was against any major participation from abroad. Racal-Millicom got the license and started operating under the name of Vodafone (an amalgamation of ‘voice data phone’).
The UK was of course an interesting market for SRA, and British Telecom was a prestigious and valuable customer for Ericsson, says Åke Persson. But the new policies were changing conditions completely. What standard would the UK adopt for mobile telephony? What would the mobile market in the UK look like? Would competing operators be allowed to use the same supplier?
SWITCH FROM NMT TO TACS
To begin with SRA tendered an NMT system for Racal, and finally a TACS system. “We drew up numerous different tenders,” Persson says. “Mike Clarke, the chief negotiator at Racal, could ring me in the morning in Stockholm and ask me to come to London to discuss things with him at lunch. Then I returned home in the evening. It went on like this for a long time. Nokia was a competitor but refused to switch from NMT to TACS so it was thrown out of the process.”
As previously described, IT minister Kenneth Baker announced in the autumn of 1982 that the British standard would be TACS.
Thomas Beijer recalls: “There were a few differences between APMS and TACS – they specified different frequency bands, for example – but these differences had no effect on costs. The problem was that it was impossible to organize roaming between the UK and the US. This was in fact a very political deal between countries seeking rapprochement in every possible respect.”
ERA’s flexibility now turned out to be the winning formula. Having learned to deal with the AMPS system, ERA was also able to cope with TACS and initially negotiated with both Cellnet and Racal. Persson recounts: “This was not really above board but we decided not to bother about that. When the news got out that we were going to supply Racal, we still had to terminate discussions with Cellnet.”
In the end, the contest to build Racal/Vodafone’s network was between ERA, AT&T and Motorola. Vodafone employees said after the fact that the AXE-based exchange tipped the balance in ERA’s favor. The staff from Televerket in Sweden tell how they were invited to Vodafone’s office in Reading to share their experiences of getting NMT up and running.
Persson says: “When I got a telephone call from Mike Clarke to say we won the deal, I marched into Åke Lundqvist, who was in a board meeting, and told the whole room we had won. ‘It can’t be true!’ he responded. He had never really believed we would succeed.”
Cellnet and Vodafone opened their UK networks in 1985.
Johansson says Vodafone was an extremely demanding customer: “We had enormous discussions which involved strong feelings, but the process was healthy for both parties, above all because it forced us to establish processes to deal with quality issues.”
The importance of the business relationship that evolved between ERA and Vodafone has been mentioned by many of those involved. Persson, for example, says: “This deal with Racal meant that we could offer systems in yet another frequency range, and the fact that British Telecom, which then had an enormous reputation, had chosen TACS guaranteed its further development.”
Two strategic choices were crucial for ERA’s success in the 1980s, reflects Persson in 2009: the decision to build systems based on AXE and the decision to go for market share even at the expense of profitability. “For that reason, we were not going to tie ourselves down to one technology. The future potential was enormous and it was a question of grabbing as much as we could.”
Author: Svenolof Karlsson & Anders Lugn