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Climbing the Capex Olympus: Huawei & ZTE

Sep 05 2008
Huawei and ZTE are sparing no effort in their attempt to climb up the medal table of global equipment vendors. Two key factors are driving Huawei and ZTE forward: strong growth in emerging markets and opportunities arising from the complicated integration of the merged Nokia-Siemens and Alcatel-Lucent. Both Chinese vendors enjoyed robust growth in 2007 and 1H 2008, thanks to relentless international expansion in emerging markets. Continued expansion of China's telecom sector also boosted both vendors, including equipment sales for ZTE of China's indigenous 3G standard. Huawei leapt past Nortel and Cisco to claim fourth place in global carrier sales, a growth of 38% YoY. Huawei's sales outside China were 72% of total, an all-time high. ZTE retained eighth place in global equipment sales on the strength of its infrastructure contracts in Africa which grew by 134% YoY. Global capex is expected to amount to USD 240 billion up by 3.6%in 2008 and will come mostly from Asia-Pacific, Africa and Latin America. Huawei and ZTE are well positioned in these markets and can expect to benefit from this growth. The wireless sector will grow strongly in 2008, especially in terms of 2G and WCDMA roll-outs. Huawei and ZTE's combined share of global wireless revenue last year was about 12.4%, thanks to progress in winning GSM/WCDMA and even CDMA contracts. Although a far cry from market leader Ericsson's 34% share, there is plenty of scope for further growth. Huawei and ZTE stand to benefit most from China's telco restructuring which will see the awarding of 3G licenses to three full-service carriers.

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Climbing the Capex Olympus: Huawei & ZTE

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