Huawei and ZTE take advantage of operators' cost squeeze
Published: 29 October, 2008
The largest Chinese infrastructure vendors, Huawei and ZTE, are both making major inroads in established mobile markets, and aim to use their low cost bases to gain more operator business as carriers are forced to cut costs even while expanding their networks.
Huawei has outlined a five-year plan for growth in mobile networking, built on the four legs of "convergence, broadband, green and evolution", as marketing VP Shao Yang put it. A top priority is expansion in north America, which the company sees as a final frontier to conquer, having gained significant market share in China, many emerging markets and Europe. Yang says Huawei now boasts 70% of the top 50 telecoms operators in its customer list.
The vendor is starting to break through in the once hostile north American market, tapping into carriers' plans to build out new AWS and 700MHz spectrum allocations with advanced networks, but at low cost. It recently won a multimillion dollar deal for an HSPA overlay for the CDMA networks of Canadian operators Telus and Bell, and is also reported to be the supplier for cableco Cox' planned AWS CDMA build-out (see separate item). Huawei's first US deal came in 2006, with Leap Wireless, where it ousted incumbents Nortel and Lucent, but it has not been so successful with the W-CDMA operators.
Meanwhile, in its third quarter, fellow Chinese vendor ZTE reported a 29% year-on-year rise in revenues to RMB10.6bn ($1.55bn), though the effects of undercutting rivals on price are clearly seen in the company's margins - net income was just RMB303.7m ($44.4m), though this was up on the previous year's RMB180.8m ($26.4m).
ZTE said it benefited from increasing demand for its GSM infrastructure, optical gear and mobile handsets, and that it seized "opportunities derived from changing global economic conditions", in other words, demand for low cost products.
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