MegaFon sets new precedent with 7-year Huawei contract

MegaFon has hailed a seven-year infrastructure upgrade contract it awarded to Huawei as "unprecedented," because it covers a period more than double that of regular contracts in Russia.

Russia's number two operator contracted Huawei to construct and modernise its 2G, 3G, and LTE radio access network, and to supply associated software and maintenance services. The contract is reported to be worth at least $600 million (€440 million), and strengthens ties between Chinese and Russian companies, Bloomberg reported.

"The seven-year contract is an unprecedented case for the Russian business environment, as similar agreements in the market are generally limited to three years," said MegaFon CEO, Ivan Tavrin.

Tavrin added that Huawei will provide "stable long term cooperation" and has already proven itself to be a "reliable supplier of the most innovative technological developments".

MegaFon stated the deal will enable it to optimise its capital expenditure on software and equipment, and cut its operating expenses for network repair and maintenance.

Wan Biao, president of Huawei Russia, said: "The Russian market is one of the most promising for Huawei, that is why long-term cooperation with such company as MegaFon is of great importance for us." Interest from Russian companies in Huawei's services "is growing rapidly," he added.

MegaFon's chief strategy officer, Alexander Bashmakov, told Bloomberg the Russian infrastructure market is highly competitive relative to the U.S., where Huawei has faced a barrage of questions over the security of its infrastructure.

The Chinese company has all but given up on the U.S. market for the time being, and is instead focussing its international efforts on Europe and other global markets.

Huawei founder and CEO, Ren Zhengfei, highlighted the strategic importance of Europe to the company in May, when he held a rare briefing with the press. During the meeting he said Huawei's business in the region would not be affected by reports that the U.S. National Security Agency had monitored the company's servers, and that his natural shyness could have contributed to suspicions about the security of Huawei's kit.

For more:
- see MegaFon's press release
- see this Bloomberg report

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