4G contracts: China Mobile throws EU firms a bigger bone

Huawei and ZTE have once again won the biggest share of a major Chinese telecom tender, despite being undercut by Nokia Siemens.

In what is certain to be the largest telecom tender this year, China Mobile handed out 20 billion yuan ($3.27b) in contracts to build its TD-LTE network in 100 cities.

Nokia Siemens surprised the industry when it was revealed during the tender that it had bid the lowest price - the first time a foreign vendor had done so. Despite that, it won no more business than other foreign players, and much less than the two large local firms.

With what appears to be immaculate stage management, Huawei and ZTE emerged with 26% each of the total tender, while the three foreign vendors, Ericsson, Nokia Siemens and Alcatel Shanghai Bell, were allocated 11% apiece. Small Chinese players Datang, Potevio, New Postcom and Fiberhome picked up the remainder.

Chinese telecom news site C114 noted that the 67% share won by local firms was down slightly from their 70% share of China Mobile's trial network last year.

The market share number is more than academic. EU Trade Commissioner Karel De Gucht has warned he would push ahead with his subsidies case against Huawei and ZTE if European firms did not win a fair share of Chinese domestic contracts.

Chinese firms have a 25% share of the EU market, according to CICC telecom analyst Chen Haofei. The 33% of these contracts that have gone to European firms are probably enough to stave off De Gucht's attentions.

As well as the size - 207,000 base stations - this contract is strategically important as the first large-scale tender for the China Mobile's 4G network. The major winners are best-placed to pick up follow-up contracts as the network expands over the next decade or so.

Lowest bid: NSN surprises in China 4G tender

Nokia Siemens Networks has thrown a curveball into China Mobile’s multi-billion dollar 4G tender by undercutting the field.

It is the first time a non-Chinese telecom vendor has bid below Huawei and ZTE in a China contract.

The tender, to supply TD-LTE equipment for 207,000 base stations in 100 cities, is the world’s biggest telecom equipment contract this year. 

NSN’s bid of 33,000 yuan ($5,460) per single carrier was the lowest of nine vendors who took part, according to Chinese media reports. Huawei and ZTE both pitched 35,000 yuan.

The move has surely surprised the super-confident Huawei camp, which has publicly predicted it would win the biggest share.

Huawei and ZTE have supplied roughly three-quarters of the equipment for China Mobile’s pre-commercial rollout in 13 cities.  That’s only slightly below the 80% share of China Mobile’s TD-SCDMA 3G network contracts that they enjoyed. 

But foreign vendors have expected a much bigger piece of the globally-supported TD-LTE business, and were reportedly furious at the heavy weighting toward the local players in the trial stage.

As local tech website Sina Tech [zh] delicately observes, China Mobile now faces a “difficult choice.” As the lowest bidder, NSN “normally” would get the highest share.

“But for many years tenders by Chinese operators have tilted towards domestic suppliers, with Huawei and ZTE accounting for the lion’s share, [making it] impossible for foreign vendors to dominate.”

China Mobile is bound by rules of the tender to award to the lowest bidder, yet must “balance between Chinese and foreign” suppliers, it said.

The tender is sure to be watched closely by EU officials for any obvious domestic ‘tilt’. The EU Trade Commissioner has launched a probe into alleged state subsidies for Huawei and ZTE exports to Europe.

Huawei up, ZTE down, NSN turns a corner

A busy day for vendors: Huawei expects a profit, ZTE a loss, and the bloom could be returning to Nokia Siemens.

Huawei has defied the tough telecom gear market to report expected 33% higher income of 15.4bn yuan ($2.48bn), with sales up 8% to 220.2bn yuan ($35bn).

It has forecast revenue to rise 10-12% in 2013.

The non-core divisions maintained their contributions. While the telco business accounted for 72.8% in sales (up 6.8% over 2011), the consumer division - which includes handsets and modems – made up 22.0% (up 9.3%) and the enterprise group 5.2% (up 25%).

Offshore sales accounted for 66% of total sales, down from 67.9% in 2011.

CFO Cathy Meng said the company had had kept general expenses under control, allowing it to “allocate more resources to bolster the front line and ensure continuous improvements on customer delivery and service quality.”

ZTE‘s expected loss wasn’t such a huge surprise, given its trying year, although investors still marked its stock down 1.63%.

ZTE said it expects a full-year loss of 2.5bn-2.9bn yuan ($379m-$439m). Operating revenue fell 18% in the last quarter and margin shrank by 11 points as a result of it chasing low-margin contracts in Africa, South America, Asia, and China.

As in previous quarters ZTE attributes the loss to an array of factors, “including postponed execution of systems contracts, decrease in revenue from terminals in the domestic market, and delayed progress of international projects.”

Meanwhile, Nokia Siemens is planning a bond issue in the next quarter – its first ever foray into the public finance markets, FT.com reports.

It aims to raise as much as €700m ($932m) with high-yield bonds to pay down bank debt and fund future investment, paper says.

The move is significant given the potential for a future flotation of the business, which has been recently rejuvenated by its parents. Nokia and Siemens talked to private equity groups about a sale of NSN last year but failed to strike a deal, forcing the groups to bolster its balance sheet with a further €1bn of equity.

Helped by that equity injection, steep cost cuts and asset sales, NSN has tallied “three consecutive quarters of underlying profitability for the first time in its history. That has led to renewed talk among financiers about a potential flotation or sale next year.”

Bids are in for China's first TD-LTE tender

Nine vendors have submitted bids for China Mobile’s first commercial TD-LTE tender, according to Chinese press.

As well as the big five firms Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens and ZTE, lesser-known local players Datang, Potevio, Fiberhome and New Postcom are also taking part.

Samsung’s networks group, which had been invited to bid, did not submit a proposal by the August 16 deadline, Sina Tech reported Tuesday.

In this first stage of network rollout, China Mobile is planning to deploy 20,000 base stations in 13 cities: Beijing, Chengdu, Fuzhou, Guangzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin and Xiamen.

Most of the bidders were offering their own equipment, eschewing OEM gear, Sina said.

NSN is world's biggest TD-LTE developer?

If you're interested in TD-LTE, this short Nokia Siemens video is worth a look.

NSN has been been running trials with China Mobile in Hangzhou (the site of its TD-LTE software lab) and Xiamen, and is getting 10Gbps throughput on a single base station. It recently passed a test with 200 users in a single cell going online, getting 100Mbps.

Without elaborating, NSN also says that following the Motorola acquisition it now has the world's biggest TD-LTE R&D team.