Ericsson on Tuesday signed a framework agreement with Ethio Telecom, Ethiopia's sole telecommunications services provider.
The new deal will allow Ericsson to take over a sizable portion of a telecommunications expansion project awarded to ZTE in the country's bid to increase mobile-phone network capacity to 50 million subscribers in 2015.
The East African country now has over 25 million mobile subscribers.
"The new deal allows the Swedish Company to take over four circles from the total six circles of the project previously given to ZTE," said Abdurahim Ahmed, the Ethio Telecom spokesperson.
Ethio Telcom awarded the new deal to Ericsson after a row over contractual terms with ZTE, according to media reports.
The two firms differed over the cost of upgrading an existing network.
There were reports that the firms were expected to carry out upgrades at no extra charge, but ZTE said it would cost an additional $150 to $200 million.
ZTE and Huawei Technologies Co. Ltd - another Chinese firm - signed a $1.6 billion deal with Ethio Telecom in 2013, with each company getting $800 million worth of projects.
After signing the agreement with Ericsson, Andualem Admassie, the CEO of Ethio Telecom, said the new agreement with Ericsson was "as an important step towards" fulfilling the country's need for communication.
"We believe in a long-term partnership with Ericsson," he said.