China's Huawei challenges European rivals

China's Huawei Technologies Co. has posted a formidable challenge to its European rivals due to its high quality technology, as well as its competitive pricing advantage, according to a Wall Street Journal report Monday citing industry watchers.

Although the telecom industry is slowly recovering, major telecommunications companies in Europe, including Telefon AB L.M. Ericsson, Nokia Siemens Networks and Paris-based Alcatel-Lucent SA are all likely to see increased pressure from Huawei.

Huawei's sales climbed to $18.33 billion last year, from $5.98 billion in 2005, while profits rose to $1.15 billion from $681 million in the same period.

According to the report, European operators have been competing with low-cost Chinese rivals which mainly have superior equipment quality.

But Huawei's growth contributed to its lower prices and improved equipment quality, Scott Siegler, analyst from research firm Dell'Oro pointed out.

"When we talk to service providers that use Huawei's equipment, we have been told that it is excellent technology," he said.

In revenue terms, Huawei's share in the global infrastructure market increased to 20.1 percent in the third quarter compared with 10.9 percent a year earlier.

While in the same period, Ericsson's market share remained flat at 31.6 percent. Nokia Siemens's market share fell to 19.4 percent from 23.7 percent, and Alcatel-Lucent's, to 13.1 percent from 14.3 percent, according to Dell'Oro.

Huawei won a contract from Belgacom SA, Belgium's largest telecom operator last week.

Telenor ASA, Norway's largest telecom operator, also selected Huawei to supply its new Norwegian wireless network to replacing previous suppliers Ericsson and Nokia Siemens earlier this month.

Telenor's chief executive Ragnar Karhus said that the six-year contract was given to Huawei due to its low prices and technical specifications.

In addition, European telecommunication operators are expected to bring in equipment based on a fourth-generation standard known as Long Term Evolution, which will bring new opportunities to Huawei, according to the report.

"We expect the transition to 4G will allow Huawei to gain momentum in Europe," according to a Goldman Sachs's recent note to investors. "Clearly there are rising competitive risks in Western Europe."

Nokia chief financial officer (CFO) Rick Simonson also noted recently that there is increasing price competition "primarily from Chinese competitors Huawei and ZTE Co."

ZTE, a Chinese telecom operators based in Shenzhen, is a smaller peer of Huawei. Its market share in the global infrastructure market rose to 6.8 percent in the third quarter from 4.2 percent a year earlier.

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