Huawei Doubles Up at KPN

Huawei Technologies Co. Ltd. has added another major European carrier to its growing customer list. Dutch national operator KPN Telecom NV (NYSE: KPN) is to use the Chinese vendor's WDM gear as it builds out its next-generation network (see KPN Uses Huawei's WDM Gear).

News of the deal comes just days after KPN announced it is to buy rival Dutch mobile operator Telfort B.V., which made news last year by awarding its 3G infrastructure contract to Huawei (see KPN Acquires Telfort and Huawei Wins in West). That acquisition means the Chinese vendor now has a supply relationship with KPN for both fixed and mobile infrastructure.

KPN will use Huawei's Optix Metro 6100 DWDM backbone switch, which also supports ATM, TDM, and IP, and the compact Optix Metro 6040 DWDM/CWDM product in its access network. The operator is in the early stages of a national infrastructure overhaul that will see it migrate to an all-IP network (see Corrigent in HR Pseudowire Report, KPN Upgrades Its Alcatel DSLAMs, KPN Picks Siemens for IPTV, and KPN Deploys Cramer's OSS).

Huawei says it's the sole supplier of WDM gear for KPN's new project, but wouldn't put a value on the deal, or say which other vendors it beat out. However, Light Reading understands that Alcatel (NYSE: ALA; Paris: CGEP:PA) and KPN's incumbent WDM equipment supplier, Nortel Networks Ltd. (NYSE/Toronto: NT), were also bidding for the business (see KPN Chooses Nortel for 10-Gig).

Huawei is the "only supplier for this upgrade. [Huawei] provided a convincing technical and financial proposition," says a KPN spokesman, who declined to provide any further details.

The optical equipment deal will further boost Huawei's European sales, which the vendor says are on course to triple to $600 million in 2005, compared with the previous 12 months (see Huawei Plans to Triple Euro Business). The company has landed a number of notable contracts in the region this year, with its optical and access equipment success at BT Group plc (NYSE: BT; London: BTA) grabbing the most attention (see BT Unveils 21CN Suppliers).

Such success and the growing international sales of Huawei's domestic rivals, UTStarcom Inc. (Nasdaq: UTSI) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), are causing anxiety among the telecom market's incumbent vendors, notes industry analyst James Crawshaw, author of a recent Light Reading Insider report, "China’s Big Three Vendors Take On the World" (see Telecom's China Syndrome and Insider Analyzes China's Big Three).

Nortel made explicit reference to this in a recent filing with the Securities and Exchange Commission (SEC), noting that: "Competition in the industry remains strong and our traditional large competitors, newer competitors, particularly from China, and certain smaller niche competitors continue to increase their market share and create pricing and margin pressures." (See Nortel Posts Q1 Loss.)

But some vendors claim that the lower prices -- anything up to 50 percent below standard industry tariffs -- aren't just coming from the Chinese companies. "Some European vendors are even more aggressive on pricing, says Francois Locoh-Donou, Ciena Corp.'s (Nasdaq: CIEN) VP of international sales.

And ADVA Optical Networking (Frankfurt: ADV) recently landed a WDM deal in France in competition against Huawei and other vendors, though it's not clear how prominently pricing factored in the carrier's decision (see Neuf Says Bonjour to ADVA). VOIP system supplier NetCentrex SA takes a different line, saying that it is developing richer feature sets to attract carrier customers. "We can't compete with Huawei on price, so we need to find another way to be relevant to the operators," the firm's founder, chairman, and CTO, Olivier Hersent, told Light Reading recently (see NetCentrex Tackles IMS (and Huawei)).

— Ray Le Maistre, International News Editor, Light Reading

---

The report, China’s Big Three Vendors Take On the World, is available as part of an annual subscription (12 monthly issues) to Light Reading Insider, priced at $1,350. Individual reports are available for $900. For more information, or to subscribe, please visit: www.lightreading.com/insider.