Huawei moves up in networking's big leagues

The Chinese networking vendor has jumped into third place, partly on the strength of big deals in China

Huawei Technologies became the third-biggest seller of mobile infrastructure in the world in the first quarter, further expanding its worldwide role on the strength of sales both inside and outside its native China.

The huge communications vendor displaced Alcatel-Lucent to take its place behind global leader Ericsson and Nokia Siemens Networks in quarterly revenue, according to market research company Dell'Oro Group. Alcatel-Lucent had the fourth biggest sales in the quarter, followed by ailing Nortel Networks. In the top three, Ericsson had 33 percent of the market, followed by Nokia Siemens at 20 percent and Huawei at 15 percent. A year earlier, Huawei had been ranked fourth, with just 8 percent.

The biggest development in the quarter was a set of contracts signed for 3G networks in China, the first such deals in that country. Biggest among these was China Unicom's US$5 billion [b] tender for WCDMA (Wideband Code-Division Multiple Access) base stations. Huawei took the biggest share of this revenue, 30 percent. But the company isn't relying only on contracts in China, nor on low prices, to gain on its international competitors, Dell'Oro analyst Scott Siegler [cq] said.

The majority of Huawei's mobile infrastructure sales have been in Europe, where the company grew dramatically in 2008 and counts Vodafone, Telecom Italia and Deutsche Telekom among its customers, Siegler said. The company also plays in Latin America, though it has yet to make significant inroads into North America.

"It's good technology, and it's a fantastic price," Siegler said.

The competition has adjusted to meet the challenge, according to Siegler. In China as well as India, the world's other huge, fast-growing market, Ericsson has been able to match Huawei's prices through volume, he said. In some recent showdowns for deployments in India, Ericsson came in with the lowest bid. Other Western manufacturers are also starting to match Huawei, Siegler said.

China will dominate 3G spending over the next few years, with three national operators planning $60 billion [b] of tenders after the government delayed the issuance of 3G licenses for several years. That figure includes TD-SCDMA (Time-Division Synchronous CDMA), a technology specific to China that Dell'Oro does not track, Siegler said. Beginning in 2011, Chinese carriers plan to start deploying 4G mobile data networks, with all three operators committed to LTE (Long-Term Evolution). Mobile phones still have less than 50 percent penetration in the world's most populous country, he said.

Foreign equipment vendors aren't being left out of the Chinese bidding, Siegler pointed out. In fact, until recently they dominated infrastructure buildouts at the national carriers, he said. Now both Huawei and ZTE, another Chinese vendor, are picking up steam at home as well as in other countries.

Despite network construction continuing in China and India, the twin juggernauts of the cellular world, equipment makers aren't bringing in as much money, according to Siegler.

"Competition is really driving down prices," Siegler said. Dell'Oro forecasts compound annual growth in revenue of just 1 percent between 2008 and 2013.

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