December 9, 2012 10:46 pm

Huawei wins Three network deal

Three, the mobile telecoms group, has awarded the management of its core network in the UK to Huawei, the Chinese equipment maker, in the latest sign of the shift of business in the sector to Asian rivals.

Under a contract valued at about £120m over five years, Huawei will deliver service management and operations for Three’s core network in the UK, the transport network and the information and communication technology applications.

The contract had been held by Sweden’s Ericsson, which has experienced a gradual erosion of its once dominant market share in segments of the telecom equipment industry over the past five years following the arrival of Chinese manufacturers such as Huawei and ZTE.

Huawei claims to be the fastest-growing managed services provider in the world, with more than 240 contracts in place with operators in more than 60 countries. But its global expansion plans have been set back in some countries, such as the US and Australia.

The Chinese business has come under scrutiny in recent months following a US congressional report that claimed the company could pose a security risk. MPs, led by Sir Malcolm Rifkind, are investigating Huawei’s relationship with BT and their inquiry is expected to be finished before Christmas.

This year, for the first time, Huawei’s first-half revenues exceeded those at Ericsson, although the figures are not directly comparable owing to Huawei’s additional sales of handsets and other consumer devices.

Even so, analysts viewed the moment as marking a significant shift in the industry, with other European rivals such as Alcatel-Lucent and Nokia Siemens Networks also suffering in a more commoditised and competitive market.

The agreement between Three, owned by Hong Kong-based conglomerate Hutchison Whampoa, and Huawei will result in a number of permanent staff being transferred from Ericsson UK to work for Huawei’s managed services business.

Three will also absorb some of the work into its own UK teams, which means that the value of the contract awarded to Huawei is less than the original deal with Ericsson. Huawei has selected India’s Tech Mahindra as its partner to deliver the ICT applications management.

Dave Dyson, chief executive of Three UK, said: ”The decision to select Huawei to manage core network operations follows a rigorous procurement process. We chose the partner that best met our requirements and which matched our long-term vision of how our network should be managed.”

Huawei plans to invest a further £1.3bn and create 500 jobs in the UK as it continues to build its business in the there. Huawei has said in the past that Europe was of “strategic importance”, and that the UK was one of the most important European markets.

Victor Zhang, chief executive of Huawei UK, said: “Huawei has now been in the UK for over 10 years and by focusing on the needs of our customers, we continue to develop and grow our business.”

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