China's Huawei wins first 3G contract in Europe

As IT and telecom equipment vendors in Europe and the U.S. outsource areas of their production to China, that country's largest manufacturer of communications systems is clinching contracts in their own backyards.

Huawei Technologies Co. Ltd. has won a contract to build a 3G (third-generation) high-speed mobile Internet network in the Netherlands, its first European order for the new high-speed mobile technology, the company said Thursday.

Telfort BV awarded the contract for an undisclosed sum to Huawei, which also agreed to launch a research and development center focusing on mobile data services in Amsterdam.

The Dutch deal came one day after the Chinese manufacturer announced the commercial launch of a CDMA2000-1x (Code Division Multiplex Access) network built with its equipment in the U.S. NTCH Inc., of Los Angeles, will begin selling flat-rate voice and data services in Southern California and Arizona next week under the Clear Talk brand. The mobile network is the first for Huawei in the U.S.

Both deals may point to a possible shift in carrier procurement strategies, which have traditionally favored local manufacturers such as Lucent Technologies Inc. and Motorola Inc. in the U.S., and Nokia Corp., Siemens AG and Telefonaktiebolaget LM Ericsson in Europe.

"As far as reasons to be concerned, I definitely think all European equipment suppliers are going to take notice of Huawei now," said Jason Marchek, senior analyst with Current Analysis Inc. "Even though the deal with Telfort isn't a tier one win, it's still a significant win."

Huawei's assault on the European networking market comes on the heals of a couple of agreements that the company has struck with Siemens. The German manufacturer, which is shifting some its production to China in a move to lower operating costs, has teamed with its Chinese rival in the hope of expanding into the huge Chinese mobile phone market.

In February, Siemens and Huawei formed a joint venture for manufacturing new mobile broadband systems, aimed mostly at the huge Chinese market. The joint venture, in which the German company has a 51 percent stake, will develop, manufacture and sell high-speed mobile network systems based on the Time Division Synchronous Code Division Multiple Access (TD-SCDMA) technology. The technology, which has been largely developed in China, is being promoted by the Chinese government as a third 3G standard, alongside Wideband CDMA (W-CDMA ) and CDMA2000.

In October, Siemens struck another deal with Huawei aimed at the enterprise networking market. Under the deal, the German company now resells routers and switches from Huawei's Quidway product line.

"I don't think Siemens views the Dutch 3G contract as an end-run or something that has come completely unexpected or is in violation of the two companies' agreements," Marchek said. "Huawei is a competitor for CDMA and W-CDMA network infrastructure, and Siemens knows that."

The Dutch contract is Huawei's fifth for 3G gear. The Chinese manufacturer has won contracts to build next-generation mobile networks based on W-CDMA technology in Hong Kong, Mauritius, Malaysia and the United Arab Emirates.

But Marchek warned that Huawei — known for its competitive prices — will also have to deliver on service if it aims to expand in Europe. "European carriers are accustomed to a fairly high level of support from their suppliers," he said. "Huawei will have to prove that it can offer this, too."