Huawei Plays Managed Service Catchup
"Ericsson AB (Nasdaq: ERIC) is the market leader in managed services, and we are playing catchup. But we are catching up very fast. By the end of this year we should bridge the gap between second and third," he says.
It is a bold claim, but Huawei has made significant strides in its managed services provisions in India, according to the spokesman.
These include the creation of a Network Operating Center just outside Delhi that is engaged with Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. , Tata Teleservices Ltd. , and Vodafone India , as well as newer operators, to manage elements of their networks. Huawei also shares a contract with Alcatel-Lucent (NYSE: ALU) for the design, deployment, and management of Unitech Wireless's GSM network. (See Unitech Turns to AlcaLu, Huawei.)
The spokesman further points to the managed services contract the Chinese vendor has with Bharti Airtel in Sri Lanka for the deployment of 3G as proof that Huawei is capable of breaking Ericsson's and Nokia Networks 's stranglehold on the mobile network operations of Airtel.
It is not unusual for telcos to establish a new type of relationship with a vendor through a subsidiary company as Vodafone Group plc (NYSE: VOD) did with Huawei when Huawei first entered the European market.
However, the recent high-profile managed services contracts in India have been dominated by AlcaLu. Its joint ventures with Reliance and Airtel have secured contracts with the telcos for mobile and fixed networks, respectively. AlcaLu is also in the driver's seat to win Reliance's fixed network contract. (See AlcaLu, Bharti Form Joint Venture, AlcaLu, Reliance Laud JV, and AlcaLu in Line to Win Reliance Deal.)
The spokesman admits that AlcaLu is strong in fixed managed services, while Ericsson and NSN lead in mobile managed services, and this gets closer to the nub of his claim. Huawei's best chance to close in on NSN is in the build, operate, and transfer (BOT) part of the mobile managed service business.
The spokesman points to localization and speed of rollout as the two factors that will define a vendor's success in India, alongside the commercials of course.
To the localization point, Huawei India's top management is dominated by Indian nationals. Regarding speed, the spokesman points to the rollout of 60,000 base stations in the year so far as a demonstration of the vendor's ability to deploy mobile infrastructure at a breakneck pace.
There is no shortage of new business to be won in India, as BOT is the de facto model for rollout in a market the spokesman describes as "buoyant and bullish." He expects that Huawei India will hit its revenue target of $2.6 billion for 2009, double that of the previous year. Furthermore, he says growth in the 2G mobile business is enough to keep Huawei on track to meet its revenue targets, irrespective of when 3G spectrum is auctioned.
The spokesman believes that what happens in India in managed services is symptomatic of what's happening in the rest of the world and is confident that Huawei will catch up quickly in managed services, just as it did with the infrastructure product market.
According to the August Light Reading Insider report, "Telecom Managed Services: The Rise of the Hollow Operator," Huawei had reported over 45 managed services contracts at the end of 2008 and an increase in sales of managed services of 67 percent for 2008.
However, the report puts Huawei's reference list significantly behind those of Ericsson, Alcatel-Lucent, and Nokia Siemens Networks on a global basis. And, according to NSN's head of services, Rajeev Suri, Huawei is still years behind in the global managed services market that the European vendor values at $277 billion. (See NSN Services Chief: Huawei's Years Behind and NSN Sees Managed Services as $277B Market.)
— Catherine Haslam, Asia Editor, Light Reading