Two very interesting stories last week regarding the growing dominance of the Chinese equipment suppliers Huawei and ZTE. Firstly we heard that
Huawei is now the #2 telecoms vendor by sales and #1 in terms of profitability. This is a remarkable achievement over a very short period of time. It wasn't long ago that the world was stunned by the 'plucky' chinese vendor managing to secure a strong role in major NGN programs such as BT's 21CN program. And since then we have witnessed a string of Huawei successes that has seen the vendor being used by 45 of the top 50 operators in the world. The commonly held belief was that Huawei were 'buying' the business by pricing almost at cost in order to grow market share. So the scale of their profitability puts a lie to that belief and makes the achievement all the more remarkable!
The second interesting and related story was the decision by the
Indian government to ban telecoms operators from buying Chinese made equipment. This will have a major impact on Huawei and ZTE who reportedly made $1.3bn and $750m of revenue in the Indian market in the past year. This sort of trade restriction cannot be good for anyone as it will presumably cause some reciprocal action from the Chinese, and I predict that it will be strongly challenged by the vendors, their government and by the Indian operators themselves who are existing customers of the chinese vendors.
It seems clear that the Huawei and ZTE business model is formidable and is forcing a constant reevaluation of the threat from the established vendors. Of course, as the equipment market will become increasingly commoditized the focus may shift to the managed services businesses of the major vendors. Ericsson and NSN reputedly manages around 500m subs and 300m subs respectively for their operator customers, and I suspect that this will be an important battle-ground over the coming five years.
Posted
07-12-2010 4:30 AM
by
Martin Creaner