Chinese equipment maker Huawei continues to make inroads into territory previously held by its western rivals, having just signed an important managed-services deal with 3UK, the small UK operator owned by Hutchison Whampoa (Hong Kong).
The arrangement will see Huawei (Shenzhen, China) handling service management and operations for 3UK’s core network, transport network and ICT applications.
It has chosen India’s Tech Mahindra (Pune, India) as a partner for the work on ICT applications.
As typically happens in such managed-services deals, the contract will involve the transfer of some staff from 3UK (Maidenhead, UK) to Huawei and Tech Mahindra.
Although the deal is reported by the Financial Times to be worth just £120 million ($193 million) over five years, it proves the Chinese company is increasingly competitive in another area once dominated by its western rivals.
The contract for managed-services work at 3UK was previously held by Ericsson (Stockholm, Sweden), which has been targeting this sector in response to the slowdown in its core manufacturing business.
Having already seen Chinese firms emerge as serious manufacturing rivals, Ericsson is now facing much tougher competition from those companies on additional fronts.
Huawei claims to be the fastest-growing managed-services provider in the world, with more than 240 contracts across 60 countries, and this year it overtook Ericsson on overall sales, reporting higher first-half revenues than its Swedish competitor (although Huawei’s figures include sales of devices, in which market Ericsson does not compete).
Even so, along with ZTE (Shenzhen, China), another Chinese equipment maker, Huawei has recently come unstuck in the US, following the publication of a report by US authorities insisting the Chinese vendors pose a threat to national security.
It was also recently shut out of a tender to build Australia’s national broadband network over similar concerns.
What’s more, the scope of the managed-services contract with 3UK is much less than Ericsson’s original deal, owing largely to changes in the country’s telecoms landscape.
In 2007, 3UK formed a network-sharing joint venture with T-Mobile UK – now EE (London, UK), following a merger with Orange – called Mobile Broadband Network Limited (MBNL), completing the merger of infrastructure in 2010.
Ericsson still has two years to run on a managed-services contract with MBNL.
With 800 UK employees already, Huawei is determined to build its position in the country, saying it will invest £1.3 billion and create another several hundred jobs there by 2017.
“The decision to select Huawei to manage core network operations follows a rigorous procurement process,” said Dave Dyson, 3UK’s chief executive, in a statement. “We chose the partner that best met our requirements and which matched our long-term vision of how our network should be managed.”