Getting Bigger

Huawei Technologies, a market leader in telecom solutions, is
expanding its wings in India. The Chinese company is upbeat on the Indian market
for wireless terminals and sees its business from telecom carriers such as Tata
Indicom, Reliance Infocomm, and Bharti Airtel set for a much faster pace of
growth. It has new plans like venturing into the GSM business via service
providers. Also, the company is eagerly waiting for the 3G-policy in India, and
is very optimistic about its business prospects with Vodafone. Globally, so far,
Vodafone has been a key partner for Huawei.

Recently, it has signed a three-year managed services deal with
Bharti Airtel Lanka, a Bharti Airtel subsidiary. Bharti Airtel, recently,
received the license to offer 2G/3G services in Sri Lanka and Huawei is going to
provide end-to-end solution to Bharti for this project. This $150 mn deal
includes providing telecom software and applications to Bharti.

Indian Opportunities

Of the $11 bn revenues for Huawei, 50% comes from Apac operations and the
India share is among the biggest. About $1.3 bn comes from its wireless
terminals business, including video conferencing products and solutions, and USB
modems and convergence home solutions. The company leverages manufacturing
facilities of Flextronics for some of the terminals business products.

Meddy Lu, director of Integrated Marketing Communications,
Huawei Technologies, says, "The Indian market for wireless terminals, data
cards, fixed wireless telephones is poised for rapid expansion, necessitating
the company to look at the option of a local manufacturing base. Though no
decision has been taken on this as yet, we are actively evaluating."

After showcasing their entire range of Huawei terminals,
supplied to telecom operators such as Vodafone, Tata Teleservices, Reliance
Communiations at the company's communications terminals lab, Lu said that the
India market offers opportunities to play a significant role in the areas of
wireless products, home gateways and fixed wireless business, including
broadband access products.

Lu adds, "The company's business model is different from
some of the other telecom companies. The approach is to offer them end-to-end
telecom solutions, including network and terminals. As and when we get orders
from telecom carriers such as Vodafone and the likes of Bharti Airtel, we offer
them these products. Therefore, the model is a business-to-business approach
rather than direct retail sales."

The company is exploring the option of setting up a
manufacturing base for terminals and is also considering the option of direct
retail sales. All these years, the focus was on providing direct
business-to-business terminal sales as a part of the total telecom solutions
model.

The IPTV Potential

The potential of the IPTV market is immense, and now, Huawei is planning to
tap the relatively unexplored Indian market for its IPTV (Internet Protocol
Television) products. "The potential of IPTV products in India is
immense," Lu told a visiting group of Indian journalists to the company's
headquarter in Shenzen, China. "India has not grown very fast in terms of
IPTV connectivity, but there is a huge requirement for these products," she
adds.

However, she did not elaborate on the amount of investment the
company plans. The proposed move assumes significance in the wake of broadcast
regulator Telecom Regulatory Authority of India's (TRAI) announcement earlier
this week that a draft paper on IPTV services in India is expected to be ready
within a month.

"If you see the Indian telecom market, it is similar to the
Chinese market. And, if you look at the Chinese market, within five years we
grabbed the market and now are the market leader. Like China, there is a huge
potential for 3G, OSN and IP in the Indian market too. We'll be providing all
IP-based solution and a complete suite of end-to-end solutions to service
providers," says, Eric Xu, senior VP and chief marketing officer of Huawei.

Earlier, TRAI had sought a consultation paper on provisioning of
IPTV services, saying there was a lack of clarity on who could provide such
facilities. Huawei has been partnering and supporting global operators like PCCW,
the world's largest IPTV service provider that operates in Hong Kong, in IPTV
commercial operations. The company also plans to enter the mobile broadband
business in India.

"We have a high market score on data cards and modems. We
have asked operators to build the mobile broadband business in India," says
Lu. Huawei sold 27 mn of its products in India, last year. "This year, we
have already achieved sales of 17 mn sets in the first six months," adds
Lu.

Though the company is more into manufacturing CDMA terminals and
has been doing a good business in India for last couple of years, they are now
open to the GSM business. "However, we are actively looking at supplying
GSM phones for other operators such as Bharti Airtel, Vodafone and expect to
shortly launch a slew of products in India. The company is also in talks with
the likes of Vodafone and Virgin Atlantic, with whom we have long-term global
deals for direct sales," she says.

She goes on to say, "The Indian market is a cost-sensitive
one and the demand for ULC (ultra low cost) handsets is quite big. However, as a
company that has the entire range of products that span ULC, mid range and
high-end UMTS sets, we expect to roll them out into India through partners. By
the end of November, we expect to launch a new range of handsets in India."
Referring to the terminals business, Lu says, "The company has about 3,600
employees and of them 50% are engaged in R&D. The company sold 27 mn units
last year, and in the first half, has logged sales of over 17 mn. In India, the
company sold over 3 mn units last year, logging revenues of about $100 mn and in
the first half, we have already shipped over 3 mn units to India."

This Chinese telecom solutions provider is upbeat on the
emerging opportunity for 3G networks in India, spanning network equipment,
applications, and handsets. The company is in the process of expanding its
R&D capability in India, encompassing next-generation networks, optical
technologies, and new platforms.

Huawei believes that India, like some of the markets in the Apac
region such as Japan, Korea, and China, does not have legacy infrastructure,
making it much easier for it to transit to the next-generation technologies.
This is also one of the main reasons why the region is witnessing much faster
technology adoption and is, in some ways, ahead of some of the Western markets,
according to Xu.

High-speed Potential

The Indian telecom market is now at a stage where the Chinese mobile network
market was about five years ago, and within five years, Huawei could grab a big
pie of the Chinese market. India has a huge demand for 3G. "However, there
is a potential for rapid deployment of 3G networks where Huawei can play an
important role, partnering various telecom carriers," Xu says. He says,
"3G could address the low broadband penetration issue, and, if that
happens, India can surpass China, which has a good broadband
infrastructure."

Speaking at the company corporate headquarters in the special
economic zone of Shenzhen, Xu says the broadband penetration in the Indian
market was relatively low, but with operators looking to deploy these new
networks, many of them would directly move on to accessing information on their
mobile phones.

On manufacturing plans in India, Xu says, "We are actively
observing the fast growing Indian telecom market and based on the business
potential and market needs, we expect to take a decision on the manufacturing
facility. "Globally, we partner with the likes of Vodafone, to whom we
supply both network equipment and UMTS handsets. And, we expect to carry this
association to the Indian market too. Already, we partner TTSL and Reliance, and
supply other operators in their quest to deploy technologies to offer Internet
protocol TV (IPTV) and 3G networks for voice, data, and video," he says.

Mobile Internet

Carriers are looking at providing mobile Internet and the technology will
play a role in improving handset capability to access Internet on mobile phones.
Huawei collaborates some of the leading companies in Europe, offering them
mobile Internet access solutions and UMTS handsets.

"We have collaborations with BSNL and MTNL and are in
parleys with several telecom carriers in India on their plans to expand
operations. Being an end-to-end technology solutions provider, including
terminals, Huawei believes that our partnership will be a natural extension as
they grow their networks to support new applications such as optical networks
and IPTV," he explained.

"For example, association with companies like Vodafone and
Telefonica, where Huawei partners to deploy new applications and help in value
creation. We would enable them to choose a specific technology that supports
them in the long run. This is necessary as there is an ongoing debate on which
technology is better, WiMax or HSPA (high speed packet access)," he says.

R&D Expansion

Huawei, which spends 10% of its revenue on research and development, has a large
R&D center in Bangalore. The current head count there is 1,800, and now it
plans to add 200 more to its strength with its own facility. The company has
invested about $200 mn and plans to deploy $100 mn more for this.

"Huawei has solutions for providing telecom services in
rural areas and extensively deploys them in unreachable tracts in China. These
serve up to 50 km. We are in discussions with Indian operators to offer them
wireless base terminals to help bridge the digital divide," he says.

Finally, the Chinese dragon is thinking of changing its
marketing strategies in India. Till date, the company has been doing its
business by associating itself directly with service providers like BSNL, MTNL,
Reliance, and Tata Indicom. It used to ship its CDMA terminals along with the
service providers, which the company is not going to change. But, for other
solutions like IPTV and video conferencing, it considers to go directly to the
market. After talking to the visiting Indian journalists on this, Lu says,
"Now, I think we should go that way, as it will give us a competing
advantage and we need to go directly to the market, as we don't have a good
visibility there despite of having the best video-conferencing solutions."
Now, if that happens, the market will definitely see some tough competition
among other video-conferencing solution providers like Polycom.

Gyana Ranjan Swain


gyanas@cybermedia.co.in

The author was hosted in China by Huawei