Huawei leads Spark NZ by hand in trail blazing 4G technology but US still too spooked to embrace the Chinese

Chinese telecommunications giant Huawei and Spark New Zealand have signed a partnership agreement which would allow the two to draw on each other to speed up their respective march towards getting a firmer grip on their mobile future.

What this means is that Huawei, a global company with massive reach, will be able to tailor technologies for New Zealand. It would also allow Spark to benefit from Huawei's extensive research and development capabilities.

This partnership was sealed at a signing ceremony on Friday held in Karaka, Auckland, and attended by visiting Chinese President Xi Jinping and prime minister John Key.

The agreement signed extends a 2013 joint innovation programme which led to Spark launching the world’s first 700MHz trial.

Spark is also starting to use Huawei technology to upgrade its 3G network nationwide, replacing the existing equipment with a cutting edge SRAN (Single Radio Access Network) platform. SRAN is one of Huawei’s key innovations, allowing operators to support multiple network technologies (e.g. 3G, 4G) over a single ‘box’, removing the need to operate and maintain multiple networks independently.

4G chase

Spark New Zealand chief operating officer David Havercroft says Spark has already made carrier aggregation (CA) technology available on six of its 4G mobile sites. Carrier aggregation allows mobile users to access two mobile spectrum bands simultaneously over their mobile devices – the combination giving them a significant increase in data speeds.

Spark will also utilise Huawei’s 4G LET (another phase in the spectrum) technology to increase 4G coverage. In August Spark commenced its rollout of 4G services to regional New Zealand, leveraging the company’s significant investment in acquiring more 700MHz spectrum than any other provider. Huawei’s LTE technology is being used by over 100 cities across the world.

The 700MHz technology offers huge benefits for rural coverage with its increased range, and also improves urban 4G performance with better building penetration, boosting performance in office buildings and other congested areas.

For Huawei, the partnership means allowing it to meet regularly with customers to see how they are using their networks and the ways to improve their experience, Huawei NZ CEO Jason Wu said.

“This has proven a huge benefit globally with layering of technologies in a single hardware package delivering huge cost savings, improved performance and a much simpler upgrade path,” Wu said.

Huawei - beginnings

Picture of Ren from convergedigest.com

Huawei was founded in 1987 by Ren Zhengfei, who attended Chongqing University of Civil Engineering and Architecture in the 1960s. He served in the People’s Republic Amy’s engineering corps, reportedly in its information-technology research unit but not holding any military rank, according to the the Economist. He left the army, moved to Shenzhen, across from Hong Kong, and started Huawei with just 21,000 yuan (NZ$4,350) which mostly sold telephone exchange equipment.

Huawei didn’t strike success until much later, its first big break came about with the introduction of the C&C08 digital telephone switch which had China's largest switching capacity. “That positioned Huawei perfectly to ride the wave of China’s telecoms-infrastructure boom of the 1990s,” according to the Economist.

The C&C08 technology was initially applied in small cities and rural areas while Huawei made its way gradually 
into the mainstream market. In 1997 Huawei won its first overseas contract. In 2004, it clinched a contract to build a 3G network for Telfort, the Dutch mobile operator. It made it to the Global Fortune 500 list, published by Fortune, in 2010.

The company went about carving for itself markets, often competing by undercutting pricing and setting out to sell in places where few went. Wharton Business School was quoted as saying that Huawei undercut Ericsson and Nokia by 5% and 15% in Africa, respectively. By 2006, its African sales were over US$2 billion.

Today Huawei has over 140,000 employees, and says 44% are in R&D. It is at the forefront of mobile carrier technology and is a key contributor to the 5G projects initiated by the European Union, and a founding member of the 5G Innovation Centre in the UK. It has an impressive patent registration profile and in the last few years have filed for some 47,000 patents.

It however faces challenges in the US market. 

Huawei has been shut out of the US market after a congressional report found the company could pose a threat to national security. Check out the Economist's Who's afraid of Huawei article here. 

Similarly, the Australian government banned Huawei from bidding as a supplier to the A$38bn National Broadband Network (NBN).

In 2013, Huawei's founder Ren was quoted in the NZ Herald telling New Zealand not to be worried about security threats from Huawei. "Our business is just like building pipes. Our pipe carries the data and information traffic - if the water running through the pipe is polluted, I think it is not the pipe that should be blamed," he was quoted saying. 

Size

“The company’s equipment is now world-class,” Jim Lewis of the Centre for Strategic and International Studies (CSIS), an American think-tank, who has studied Huawei’s rise, was quoted by the Economist.

Huawei’s revenues in 2013 was US$39.46 billion while its net profit was $3.46b. In July, the Wall Street reported that Huawei's revenues for the first half rose to 135.8 billion yuan from 113.8 billion yuan a year earlier. Its operating margin was 18.3%, above its 2013 operating margin of 12.2%. 

Huawei competes with Sweden's Ericsson in the global telecom gear market. Ericsson's net sales for the first half fell 4.7% to 102.4 billion Swedish kronor (US$15 billion), while its operating margin stood at 6.5%. But unlike Ericsson, Huawei also sells consumer products such as smartphones.