ANALYSIS: Huawei takes on Europe

ANALYSIS: Huawei takes on Europe

Shunned from both the US and Australia, Huawei has turned to Europe to prove its worth in the vendor market – and with enormous success. Capacity explores the repercussions of this for both the Chinese conglomerate and Europe itself.

Huawei will claim America’s loss is Europe’s gain. The Chinese vendor’s aggressive 4G-LTE build-out across the continent is finally helping European telecoms to address its digital divide with the rest of the world.

Its investment in Europe will also serve as a message to the wider telecoms community of Huawei’s intentions to establish itself as a truly global company, after being shunned by the US and Australia amid network security concerns.

The company’s issues in the US stem back to October 2012, when the US House of Representatives’ Intelligence Committee drafted a report proposing that Huawei should be cut off from the US market. The relationship between the Chinese vendor and the US has since taken a dramatic downward spiral, with several other firms in the region following suit.

Huawei’s EVP, Eric Xu, went on the defensive in April this year, claiming: “We are not interested in the US market anymore. Generally speaking it is not a market that we pay much attention to.”

More recently, Australia’s newly elected government decided to uphold a ban preventing Huawei from working on Australia’s National Broadband Network (NBN) roll-out, despite the slow uptake of the project across the country.

But with the majority of the world closing the door in Huawei’s face, Europe – and the UK in particular – retains confidence in the company.

UK prime minister David Cameron confirmed his support for the Chinese vendor, and this month UK operator EE signed an agreement with Huawei for its LTE-Advanced network deployment.

EE claimed that it will be the world’s fastest LTE-A network upon completion, and the deal marks a significant technological leap for Huawei, not only in Europe, but also the wider vendor market.

“We have been operating in the UK for 12 years and are committed to improving the national infrastructure for the whole population,” said Victor Zhang, CEO at Huawei UK. “We are proud to have worked closely with EE as we grow our business in the UK, following our pledge to invest £1.3 billion into the economy over the next five years.”

As well as being at the forefront of LTE-A technology, Huawei has also confirmed that it plans to invest $600 million in 5G research by 2018. The company began investing in 5G technologies in 2009 and has made a number of commitments in Europe to the technology, including participation in the EU’s 5G research projects and the establishment of a 5G innovation centre in the UK.

Developing LTE-A technology puts Europe in a stronger position to compete with other mature markets across the world in the mobile space, while the US has interestingly still not yet begun to experiment with LTE-A technology in any serious fashion.

Huawei has prior experience in launching the service, and facilitated a trial of LTE-A in the Philippines. Its LTE market share is also impressive, standing at 40% worldwide, according to research data.

Its aggressive pursuit of the European market may be a welcome development for operators wanting to deploy its innovative technology, but its entrance into the region intensifies the cut-and-thrust of the already highly competitive European supplier scene.

Tom Fallon, CEO at optical network vendor Infinera, thinks there is too much competition in the vendor industry already. “I think our industry is overserved and that will fix itself over time,” he said. “I think it will consolidate, but it will not happen in a short period of time.”

Fallon also notes the problems facing French vendor Alcatel-Lucent.

“While they [Alcatel-Lucent] appear to be directionally getting better, they’re still burning money at a ferocious rate,” Fallon warned.

The French company’s CEO Michael Combes told reporters in October that if its situation did not change, the company was set to disappear. Two months later and the company reported impressive financial results of €3.67 billion in its third quarter; a success which did not come without cost, as the company cut 10,000 jobs across the globe in a bid reduce its debts.

But after his negative quip to the press in October, Combes is seemingly uplifted by the latest results, which he attributes to the company’s Shift Plan – a financial restructuring designed to transform the company’s fortunes.

“We are seeing the first positive signs of our new operating model in our day-to-day business and are encouraged by the substantial progress in the Shift Plan key metrics,” he commented.

“Going forward, we remain fully focussed on execution to leverage the momentum we are building.”

But with Europe-based Alcatel-Lucent rising only cautiously back to its feet, will Huawei’s entrance to the region knock it back down again?

Huawei has been successful in a growing number of European countries – Italy, Denmark and Switzerland to name but a few – and with further consolidation expected in the region, it is a very real possibility.