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When Huawei serenaded Mukesh Ambani in China

Monday, 27 June 2011 - 8:00am IST | Place: Shenzhen | Agency: dna

Telecom equipment maker may offer sweetheart deal to the hardball negotiator for massive LTE equipment order.

Early this month, Huawei Technologies Co Ltd’s sprawling campus in Shenzhen was host to an unusual visitor from India: Mukesh Ambani.

The chairman of Reliance Industries held secret confabulations with Huawei’s top brass including the reclusive founder and CEO Ren Zhengfei, as he prepares for a grand entry into the broadband space in India.

That he was serenaded is a given because of the many-multimillion dollar orders for LTE (acronym for Long Term Evolution, the latest mobile communication technology) equipment that he is expected to sign on.

For large telecom vendors, India has been a subdued
market in the last two years.

If security issues played the speed breaker initially, economic and political vagaries, brutal competition and chary bankers throttled growth last fiscal.

As a consequence, Ericsson, the market leader in telecom equipment, saw its revenues in India plunge 29.4% from Rs8,749 crore in 2009-10 to Rs6,173 crore in 2010-11, while Huawei saw a decline of 23.5% from Rs7,433 crore to Rs5,688 crore, according do Voice & Data, a journal tracking the telecom sector.

All that’s slated to change.

By December this year, analysts expect the telecom market look up as spends on 3G rollouts commence.

“The long-term story is robust. Telecom vendors such as Huawei will look at gaining market share for a price,” says Prashant Singhal, who heads the telecom practice for Ernst & Young, the auditor and consultant.

In Europe, the telecom markets swung down immediately after 3G auctions, only to rebound strongly after 3 years.

Some vendors are more optimistic.

Dabing He, president of marketing, enterprise business group, Huawei, estimates the Indian equipment market will touch $10 billion in five years, with his company growing in tandem.

Huawei will position itself as an end-to-end solutions provider and even offer terminals such as dongles and handsets compatible to 4G or LTE networks.

The Chinese telecom gear maker has told marketing staff in India they will be measured for performance this year on sheer market growth and not on profitability or margins.

“Indian margins are lower than elsewhere in the world,” Dabing He said. “We’ll concentrate on penetration and growth, and we’ll leave a small room in terms of pricing,” he said.

That would be welcome news for Indian operators.

Huawei has succeeded in snaring a few circles where Bharti Airtel operates  — territories that, for over a decade, was the backyard of European vendors such as Ericsson and Nokia.

While RIL is a new player in the telecom market, Huawei hopes its previous experience of working with Chinese companies will help.

Ambani also has a past track record of doing business with the Chinese: RIL had contracted work to Chinese companies for setting up pipelines and also when its refineries were being built.

At present, Ambani is in the midst of setting up another telecom venture ground-up through Reliance Infotel, a subsidiary of RIL.
It will offer fourth-generation broadband, in tango with similar launches in the US and South Africa.

For Huawei, Ericsson and Nokia, winning the equipment order from Reliance will be a major coup because RIL is known for big-bang launches.

Huawei’s senior officials were guarded about the Ambani trip, but are bullish and effervescent when quizzed about the Indian market as a whole.

The company has done business in India with Bharat Sanchar Nigam Ltd and Aircel and a few others for equipment and devices.

Yang Weimin, president of LTE product line at Huawei, said India will be next only to China in the coming years for the company.

“This is just the beginning for us in India,” he said.

Next year is crucial for Huawei as well as for the telecom world, Weimin said, because of India, US and South Africa going live with LTE.

In China, though, the story will be different. That’s because the bandwidth owned by telecom operators for third-generation is bigger, so Huawei expects China to adopt LTE slower than India.

“India will be very aggressive in LTE deployment. We can see a deployment by RIL in India by 2012,” another Huawei official, who did not wish to be named, said.

Huawei has invested heavily in the development of the LTE industry since 2004.

“Huawei’s advanced LTE technology and SingleRAN LTE solution enables telecom companies to gradually shift to newer technologies whenever they are introduced. It will replace outdated legacy base stations, while simultaneously initiating their LTE network deployment,” said the official.

Vodafone Germany and TeliaSonera in Norway have already selected Huawei as a vendor.
— The writer was in China recently at the invitation of Huawei

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