Huawei grows on aggressive deals

Chinese network equipment maker Huawei Technologies recorded a 300 per cent increase in sales in New Zealand in the year to December 30, according to new filings at the Companies Office.

Sales increased from $19.8 million to $79.6m.

The sometimes controversial company, which set up a local office in 2005 and now boasts more than 80 employees in New Zealand, has won contracts over the past few years supplying equipment for unbundling the local loop and most recently supplying network equipment to Chorus, Waikato Networks and Christchurch's Enable Networks for the government's ultrafast broadband and rural broadband projects.

Huawei also supplied equipment to mobile challenger 2Degrees for its mobile network rollout and in 2011 won a $140m contract to expand it.

Although Huawei's client isn't named, the latest accounts appear to shed light on the structure of that contract - revealing 2Degrees bought its network expansion on tick and suggesting some pretty aggressive terms.

Huawei is financing the two- year build of a "turnkey" contract, with its client to take possession when the network is completed.

Huawei recognised a total credit exposure on deferred sales to a single customer of $30.3m at the end of the period. Just $275,894 in interest was paid during the year for the vendor financing. The interest rate is not revealed, but it is described as being provided "at market rates".

Elsewhere, Huawei reveals it borrowed $9.1m from its Chinese parent at interest rates between 1.765 per cent and 1.786 per cent during the year.

The accounts show 2Degrees will pay for the network itself in 16 consecutive quarterly instalments finishing in 2017.

A Huawei spokesman said it preferred not to discuss the commercial arrangements it has with its partners "but we can say that your extrapolations and conclusions are incorrect".

IDC telecommunications research analyst Peter Wise said Huawei would be keen to establish its credentials in an OECD country and New Zealand would be relatively cheap. "On normal business terms it seems incredible," he said. "It shows how aggressive they've been in getting into the market."

Huawei also supplies equipment to Vodafone for its broadband network and has launched some of its smartphone models in New Zealand through Telecom, Vodafone and retailer DigitalMobile.

Earlier this year Huawei was dogged by reports out of Australia that security concerns and the company's suspected connections with the Chinese government resulted in it being excluded as a supplier to Australia's National Broadband Network rollout.

Meanwhile, Huawei's network engineering rival Alcatel Lucent, which built Telecom's new 3G network, recorded a 10 per cent decline in New Zealand sales in the year to December 31 from $261.7m to $236m. After-tax profit fell from $11.3m to $4.2m.

Nokia Siemens Networks and Ericsson Communications have yet to file their 2011 results, but Nokia Siemens recorded $61.5m in sales in the year to December 31, 2010, down from $70.5m 2009. Ericsson recorded $19m in New Zealand sales in 2010, down from $28.5m.

Sunday Star Times