Fear of Huawei driving mega-mergers

Stuart Corner
Sunday, 23 July 2006 12:33

IT Industry - Strategy

The recent spate of megamergers between some of the world's largest telecom technology suppliers is being triggered in large part by the emergence of China's Huawei Technologies as a major force in the global telecom equipment industry, according to a new report from Heavy Reading.

The report predicts that further consolidation is likely as Huawei continues to expand into emerging markets and Western Europe. "The most game-changing factor in the telecom supply market in the past five years has arguably been the expansion of Huawei outside of China," according to Scott Clavenna, chief analyst with Heavy Reading and author of the report.

"Huawei has forced established suppliers such as Alcatel, Lucent Technologies, Ericsson, Nokia, and Siemens to merge and realign to better compete. With the benefit of an expanding Chinese telecom sector driving basic revenue growth and substantial economic support from China's government, Huawei has been able to broaden its product line and address emerging market opportunities throughout the globe with such speed and power that the global telecom supplier market has been able to do little more than watch in stunned silence," Clavenna said.

Huawei recorded nearly $US6 billion in revenues in 2005 and now has 35,000 employees, products deployed in more than 100 countries and revenue growth exceeding 50 percent per year. "In 2005, Huawei was able for the first time in its brief history to sell more internationally than domestically, and also penetrate Western Europe's top carriers, with wins at BT, Vodafone, Telefónica, and KPN," Clavenna says.