3UK deal and Finland center boost Huawei in Europe

Huawei continues to expand in Europe, setting up an R&D center in Nokia's back yard in Finland, and winning a managed services partnership with the UK's fourth cellco, 3UK. However, a European Union internal report judges that the Chinese firm, along with ZTE, is dumping wireless equipment, which could lead to action next year.

Despite the EU probe, Huawei has not suffered the same hostility in Europe as in the US, where tier one operators have been warned not to buy critical gear from the two big Chinese firms on alleged security grounds. By contrast, Huawei has won LTE deals in many parts of Europe and is already a managed services provider in the UK to Everything Everywhere.

Now it is replacing Ericsson in 3UK's core network. The operator said two years ago that it would not renew its outsourcing deal with the Swedish vendor when it came to the end of its seven-year term at the end of 2012. The reason was partly the major change that has taken place since 3UK formed its network sharing joint venture, MBNL, with T-Mobile (now part of Everything Everywhere). The project to merge those two networks was completed, under Ericsson's auspices, in 2010, and the Swedish firm continues to manage this shared RAN at least until 2014.

Huawei's deal, by contrast, is to deliver service management and operations for 3UK's core network, transport network and IT applications, which are not part of MBNL. Huawei has selected TechMahindra as a partner to deliver the ICT applications management element. InMarch, Huawei won a similar five-year deal at O2 UK, to manage the multivendor core and transmission networks, though that one also includes access.

Dave Dyson, CEO of 3UK, said: "The decision to select Huawei to manage core network operations follows a rigorous procurement process. We chose the partner that best met our requirements and which matched our long term vision of how our network should be managed."

The UK has been a major focus of Huawei's efforts to create a major European base. In September senior executives met prime minister David Cameron and promised to create 700 jobs by 2017, and invest £1.3bn in the country. The Chinese firm already employs over 800 people in the UK and has pledged to invest £650m in 10 "global centres of technical and financial excellence", including group-wide R&D facilities.

Some of that R&D investment, however, will now be ploughed into Finland, where Huawei will open a smartphone development site in capital Helsinki, part of a program to double the size of its R&D activities in Europe, and perhaps tap into some former Nokia talent.

Huawei plans to expand its R&D staff in Europe to 14,000 people over the next 3-5 years, from around 7,000 today. It says it will invest €700m over five years in the Finnish location, its eleventh research center in Europe and the second to focus on devices rather than network infrastructure. But the Chinese firm's handset business, which last year accounted for about 20% of its revenue, grew 37% year-on-year in 2011, far faster than its other businesses. The new team will work on a user experience to overlay Android and Windows Phone, not just hardware.

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