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Mobile World Congress 2018

China’s Huawei set to lead global roll-out of 5G mobile networks

While projects to start building the next-generation mobile networks are a year away, Huawei has signed at least 25 agreements with telecommunications operators in Europe and Asia to trial its 5G-ready equipment.

PUBLISHED : Friday, 23 February, 2018, 7:46pm
UPDATED : Friday, 23 February, 2018, 7:46pm

Huawei Technologies is forging closer commercial ties with big telecommunications operators across Europe and Asia, putting the Chinese company in prime position to lead the global race for next-generation 5G networks despite allegations by the United States that it poses a security threat.

Shenzhen-based Huawei’s dominant position in China – set to become the world’s biggest 5G market by far – is well-documented.

The privately held technology company, however, has also made inroads in the rest of world to compete with rivals Ericsson and Nokia in several lucrative markets, including countries that are long-standing US allies.

5G networks, now in the testing stage, will rely on denser arrays of small antennas and the cloud to offer data speeds up to 50 or 100 times faster than current 4G networks, and serve as critical infrastructure for a range of industries. 

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Deals to start building 5G networks are still largely a year away, but Huawei has signed 25 Memorandums of Understanding (MoUs) with telecoms network operators to trial its 5G-ready equipment, a Reuters review of company reports and announcements found.

These MoUs – pre-cursors to potential commercial contracts – include agreements with Britain’s BT, Bell Canada (BCE), France’s Orange, Germany’s Deutsche Telekom and global player Vodafone.

Huawei lags behind Sweden’s Ericsson, with 38 MoUs, and Finland’s Nokia, with 31, according to the data, which does not include deals that have not been made public.

Still, Huawei’s existing partnerships with telecoms network operators could give it an extra edge; as of 2016, Huawei said it had supplied more than half of the 537 4G networks globally and 59 of the 90 4.5G networks – an intermediate step before 5G.

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“Existing network footprint is important because operators still need to maintain their legacy … networks and could save money by using the same vendors,” said Stefan Pongratz, an industry analyst with research firm Dell‘Oro.

Huawei also has the home advantage: the firm and smaller, domestic-focused peer ZTE Corp are each guaranteed about a third of China’s 5G network contracts, under Beijing’s policy, while foreign players have to compete for slivers of the market.

By 2025, 1.2 billion people worldwide are set to have access to 5G networks – a third of them in China, according to the GSMA, a global trade group of nearly 800 mobile network operators.

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There are, however, potential risks ahead; Huawei, like its rivals, has spent billions of dollars developing 5G network technology, but there are no guarantees about when telecoms network operators around the world will adopt the new technology.

Many cash-strapped operators want to see significant consumer and business demand before allocating capital, something out of Huawei’s control. Some emerging markets have yet to adopt 4G, putting major 5G moves at least a decade off. 

Huawei is triple the size of either Nokia and Ericsson in terms of its annual revenue, which totalled about US$92 billion last year, half of it from China.

The Chinese firm sold 32 per cent of global mobile radio access gear – antennas and base stations – in the past quarter, against Ericsson’s 30 per cent and Nokia’s 25 per cent, according to market research firm Dell‘Oro.

Ericsson has been under heavy pressure to cut costs in recent years at a time of dwindling profits, while Nokia has had to integrate multiple acquisitions in its networks business.

Nokia said it was confident its broad 5G portfolio, which also includes software and services to manage networks, would allow it to win a bigger slice of the telecoms network equipment market.

Ericsson said its long-standing ties with customers and advanced 5G patent portfolio would keep it competitive. “All our customers are looking at 5G,” a spokesman said.

Huawei’s 5G MoUs include non-binding agreements with big telecoms network operators in South Korea, Japan and Australia, Italy, Turkey and Saudi Arabia, on top of Britain, Germany, France and Canada.

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Potential commercial benefits aside, those agreements indicate that many countries allied to the US do not share Washington’s security concerns.

A bill introduced in the US Senate earlier this month would bar equipment from Huawei from any US government networks to prevent Chinese spying.

A leaked presentation from a US National Security Council staffer earlier this year suggested the US government build its own 5G network – a proposal that was widely ridiculed by industry experts.

Huawei categorically rejects US spying concerns.

“Huawei is trusted by governments and customers in 170 countries worldwide and poses no greater cybersecurity risk than any (telecoms equipment) vendor, sharing as we do common global supply chains and production capabilities,” a spokesman said.

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Bruce Rodin, vice-president of wireless networks for Bell Canada, said his company used an external cybersecurity firm to conduct extensive testing of Huawei products.

“We’ve been doing it for about 10 years and never seen malicious code or back doors,” said Rodin, characterising the US moves as an effort to protect American companies.

“It’s a commercial thing. They are protecting their industry,” he said.

Deutsche Telekom said it cooperates with Huawei on many levels and found no evidence of security risks.

“The hardware is built to Deutsche Telekom’s specifications and is examined by our own security department,” a spokesman said.

Orange told Reuters it is cautious with Huawei “as with any supplier”.

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Thomas Jarzombek, a member of the German parliament and digital spokesman for German chancellor Angela Merkel’s Christian Democrats, said that in the wake of revelations about US spying by former National Security Agency contractor Edward Snowden, American technology companies were not necessarily to be trusted either.

This month, a trade mission by British Prime Minister Theresa May to China included a glowing endorsement of Huawei for its commitment to Britain.

Debates over the timing of 5G deployment will top the agenda at Mobile World Congress, Europe’s biggest annual technology conference taking place next week in Barcelona. The industry is counting on the new mobile technology to trigger a wave of growth in network equipment sales and mobile services starting in 2020.