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Friday, March 27, 2009

Huawei Tries to Crack U.S. Market (Wins Cox Contract, Is Finalist for Clearwire Deal)

Chinese telecommunications-equipment maker Huawei Technologies Co. Ltd. is making inroads in the U.S., a market it has previously had trouble cracking because of competition from Western rivals and national-security sensitivities.

The company has won a contract to supply the network infrastructure for Cox Communications Inc. plans to launch in some markets later this year.

Huawei is also in the final running for a potentially bigger wireless-network contract with Clearwire Corp. Clearwire is in the process of selecting vendors to build a wireless broadband network that would cover 120 million people by 2010, offering Internet speeds on a par with today's cable connections.
Clearwire raised $3.2 billion for the rollout last year from a consortium of tech companies including Google Inc. and Intel Corp. to build the network based on a fourth-generation technology called WiMax. If Huawei wins a Clearwire contract, wh
ich would include providing equipment that runs cell towers, it would likely be the company's largest U.S. deal. Other finalists for the Clearwire contract include Motorola Inc., Samsung Electronics Co., and Nokia Siemens Networks.

Besides the new Cox contract, which UBS analyst Nikos Theodosopoulos estimates at less than $100 million a year, the Shenzhen, China-based company's infrastructure business in the U.S. is limited to a deal with niche player Leap Wireless International Inc.

U.S. wireless carriers are expected to spend $19 billion on infrastructure this year, according to UBS, down 12% from last year but still a huge prize for equipment vendors.

Cracking into the U.S. has been difficult for Chinese manufacturers such as Huawei and rival ZTE Corp., because incumbents like Alcatel-Lucent, Motorola and Telefon AB L.M. Ericsson dominate the market.
Big challenges for the Chinese manufacturers are political and national-security concerns. Some companies fear they may lose U.S. government business if they pick Chinese vendors for their networks.

While ZTE emphasizes its status as a public company, Huawei is a private company founded by a former army officer.

Huawei was stymied in attempts last year to complete another U.S. deal -- the buyout of 3Com Corp. -- because of national-security concerns.
Fairly or unfairly, there is probably a prejudice against them especially if they want to buy companies to enter the U.S.," said Ping Zhao, telecom-equipment analyst at research firm CreditSights.

Huawei also has become a major vendor in Europe, where it has won numerous contracts with players such as Vodafone Group PLC and France Telecom SA's Orange. And Huawei has gained a foothold in Canada, where it is building third-generation networks for BCE Inc.'s Bell Canada and Telus Corp.

Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved

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