Huawei Throws 3G Gauntlet

GENEVA -- ITU Telecom World 2003 -- Chinese equipment vendor Huawei Technologies Co. Ltd. launched its UMTS 3G base station here at Telecom World 2003, boasting that it could match its western rivals technically and win carrier contracts in China and overseas.

The vendor, well known for its running battle in the fixed world with Cisco Systems Inc. (Nasdaq: CSCO) (see Cisco/Huawei Lawsuit on Hold), says it already has its product in pre-commercial mobile networks in Russia, Malaysia, and the United Arab Emirates, as well as on its home turf.

Huawei says it is "very confident" of winning contracts from operators awarded universal mobile telecommunications system (UMTS) 3G licenses in China, according to Huawei spokesman Richard Lee. If it did, it could snatch away business from the more established wireless infrastructure players such as LM Ericsson (Nasdaq: ERICY), Nokia Corp. (NYSE: NOK), Nortel Networks Corp. (NYSE/Toronto: NT), and Siemens AG (NYSE: SI; Frankfurt: SIE), all of which are looking for sales in China, which now has the most mobile phone users on the planet (see Siemens Prepares for China Deal). [Ed. note: the most tea drinkers, too!]

UMTS is the standard third-generation upgrade for GSM networks and is the European standard for such next-gen services. Technically, the system uses a wideband-CDMA (W-CDMA) air interface combined with a GSM core network to increase data transfer rates to a theoretical 2 Mbit/s.

Huawei believes it is likely that China Mobile (Hong Kong) Ltd. (NYSE: CHL) will be awarded a license to operator a UMTS network, while China Netcom Corp. Ltd. and China Unicom Ltd. are also possible candidates, says Lee.

The vendor is also bullish about its prospects away from its home turf. It already has its GSM infrastructure kit installed in 30 countries, in addition to 26 of the 30-plus Chinese provinces, though Lee admits that its GSM products are "about two years behind" in terms of technological development. But he says the Huawei 3G equipment is on a technical par with its rivals, and that the vendor can undercut other suppliers significantly on price.

But while there's every chance that a Chinese vendor would pick up business in China -- it would be unusual if that did not happen -- it would be a major shock to see Huawei win any 3G network contracts in the major Western European and North American territories. Its main prospects lie in Asia/Pacific, the Middle East, Eastern Europe, and Africa.

Huawei has a unique slant on the advantages of the technology for its potential 3G customers, especially in China. Lee says the key advantage for next-gen wireless systems in China will be better voice quality, and that's what Huawei will be focusing on delivering once licenses have been awarded.

That is quite different from the tack taken by most other vendors, which have pushed 3G technology as a conduit for delivering multimedia data services to users, but Lee says the Chinese carriers will be less interested in GSM than in delivering better-quality voice services at a reduced cost, as that -- and not additional data capabilities -- will be the big selling point with Chinese consumers.

— Ray Le Maistre, International Editor, Boardwatch

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