May 12,2009

Huawei's Great Leap in India.

By CSC staff, Shanghai

Two GSM, or Global System for Mobile communications, equipment giants,Huawei and Ericsson were again in a confrontation in India not long ago. On May 10, the two companies became the only GSM and 3G equipment providers of BSNL, an Indian telecom operator. In this economic winter, the two old rivals are actually sharing the $6 billion supply contract.

In 2008, Huawei had made major breakthroughs in areas such as wireless, fiber networks, and key networks in India. They also successively signed GSM and CDMA equipment and service supply contracts involving over $2 billion with mainstream telecom operators including Reliance and Tata. Its annual sales in India reached $1.3 billion.

According to a Huawei insider, the Indian market is more price sensitive than China and the price wars are fiercer in India. After entering the Indian market in 1999, Huawei failed to make any noteworthy breakthrough in the first few years. However, its sales income in 2006 and 2007 reached $200 million and $600 million respectively, successfully making India its largest overseas market.

Huawei established a R&D center in India in 1998 and set up a branch with a total investment of $100 million as its center for development in Southern Asia. Huawei plans to invest $60 million in India to set up factories in the next three years. Since 2000, the company has submitted application for trade qualifications of building a manufacturing plant to the Indian government nine different times. However, in July 2008, the security and military department rejected Huawei's application for the ninth time, evoking the defense of "national security." Even so, Huawei's development in India is still quite rapid. In the past three years, its Indian R&D center has expanded by over 100% and its total sales in India has reached $300 million.

BSNL divided its market into four areas. Ericsson got the northern area and Huawei got the western and southern area. The two companies became candidate providers in the eastern area at the same time. As Huawei and ZTE are the only provider in their respectively areas, this means BSNL has already accepted their equipments and bid prices.

However, BSNL is still not able to sign contracts with the two immediately. India will form a special committee to evaluate any potential national security threats involved in the deal. Other bidders included ZTE, Nokia-Siemens and Alcatel-Lucent, but all failed.

Recently Ericsson and Huawei have become winners of the same deal. Ericsson's global market share has risen from 33% to 34% in 2003 to 43% to 44% currently. Ericsson CEO Carl HenricSvanberg said Huawei's increase in market share mainly came from other equipment providers that are in trouble, instead of Ericsson.

With $18.33 billion of total income in 2008, Huawei has already become the world's fourth largest telecom equipment company. However, a CCID Consulting analyst believes if Huawei's growth remains unchanged this year, it will become the second largest telecom equipment provider in the world, only next to Ericsson.

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