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While Huawei remains effectively excluded from tier one US telco deals, it is making solid progress in European network modernizations and is now extending its reach in managed services, a key territory of arch-rival Ericsson. The Chinese vendor has won its first major UK contract in this area, with Telefonica unit O2.

Under a five-year deal, Huawei will be responsible for "planning and managing the core transmission, mobile access and core network build in the multivendor core network". A total of 56 permanent staff will be transferred from Telefonica UK to Huawei's managed services division.

The firm's managed services business is buoyant, and it claims to be the fastest growing such provider in the world, boasting 240 contracts with operators in over 60 countries. Its longer established rivals - Ericsson, Nokia Siemens and Alcatel-Lucent - have all been chasing such deals to increase revenues and tighten their hold on major operators, although all have acknowledged a resulting shift in cashflow and profit mix.

Many cellcos, led by those in emerging economies like Inda, are outsourcing the running of their networks, often to the same suppliers which handle their upgrades to 3G and/or 4G. Ericsson won a flagship contract with Sprint, though another US carrier, AT&T, has been bucking the trend and bringing many network operations back inhouse to improve its control and responsiveness.

"Huawei works with Telefonica in a number of markets around the world and today's agreement means we are extending our relationship to the UK," said the supplier's UK CEO Victor Zhang. "Today's announcement is an important first step in building a world class managed services capability in the UK."

The UK has been an important stepping stone for Huawei, towards respectability among the top tier European cellcos. It recently won a 2G modernization deal with Everything Everywhere, which some believe will be the prelude to a role in the largest cellco's more advanced network build-outs. At O2, it will be disappointing Ericsson with this latest win, since the Swedish vendor supplies the operator with field maintenance services and some network kit, and won a core network modernization project last year.

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