Huawei threatens on many fronts

Times are hard for Europe's infrastructure vendors with Ericsson chopping nearly 1,000 of its European staff as its looks to further cut costs, senior execs of Siemens and Nokia sending a joint letter to customers of NSN affirming their support for its future, and Alcatel-Lucent rating as a long-term walking wounded given that it has posted losses for the past 12 quarters.

While these three firms struggle to reshape their financial position and rejuvenate their product strategies, the continued rise of the Chinese vendors--Huawei and ZTE, must be consuming many hours of management debate in HQs around Europe as how to combat these invaders.

Chief among their worries must be Huawei.

The company had the reputation of lacking technological innovation and little if any localisation, but in turn offering rock-bottom pricing and aggressive vendor financing.

Huawei broke into the European market winning deals with several smaller operators, which would have been no more than an annoyance to the big-league suppliers during the boom years of the mid-2000s.

However, Huawei now claims European sales in 2008 were US$3 billion compared to just US$160 million in 2003, and counts over 40 of the world's 50 largest telcos as customers.

The company is keen to stress that innovation is now a key part of its marketing strategy, with an emphasis on LTE. Interestingly, from a position of no patent applications in 1994, Huawei claims to have applied for more international patents in 2008 than any other vendor. Furthermore, Huawei claims to be one of the top three LTE patent holders.

The company has already secured LTE deals with TeliaSonera Sweden and Telenor Norway, which could provide very valuable reference sites for many other European operators that are sure to be watching--assuming deployment is successful.

According to Steven Hartley of Ovum, Huawei is starting to address the localisation issue with over 60 per cent of its 3,000+ staff in Europe being European. However, this move to making the company more ‘local' brings with it higher European costs, stripping away some of Huawei's reputation for low-cost equipment. There is also the potential for government concerns over Chinese involvement in telecoms infrastructure that is seen as strategically important to the country's security.

Other than this, says Hartley, it is difficult to find any reason now why European operators shouldn't work with Huawei. And that should cause even more concern among the already worried vendor establishment.-Paul