Huawei on Monday morning announced a memorandum of understanding with 3 Kenyan Universities. At the event,Li Da Feng, president Eastern and Southern Africa at Huawei remarked that Huawei was now the second largest telecom supplier by revenue in the world, after Ericsson. 2010 saw Ericsson make USD 32.72 billion in revenues while Huawei made US$8 billion.
Huawei is a household name in Kenya -many of Kenya's internet subscribers access Internet via mobile networks, who provide connectivity mostly via Huawei modems. Then there is the popular Huawei U8150 IDEOS Android phone which has sold over 60,000 units since its launch in February 2011. However, the device sector is an emerging segment of Huawei's business, a segment that is expected to become fully fledged in 2012 -- 2013.
A few years ago, Safaricom was the only telecommunication company that was using Huawei equipment. Yu, the latest entrant in the market, had contracted Ericsson as its equipment supplier as it first phase roll out targeted Nairobi and Mombasa. Ericsson had been carried over as a vendor from its majority share holder, Zimbabwe's Econet.
Ericsson is also credited to have created the core of Kenya's third entrant, France Telecom's Orange GSM network. Safaricom's core and billing platform were also based off Ericsson's Technology.
Alcatel helped establish Kenya's second mobile operator, Kencell in a controversial contract where the former is accused of bribing government officials to win the contract. The relation was maintained as Kencell sold off most of its stake to Celtel who later sold to Zain. At some point, Alcatel, now Alcatel-Lucent was replaced by a consortium of Ericsson and Siemens,now Nokia-Siemens.
At the moment, Orange is on a national upgrade of its network, which Mikhael Ghossein touts to be a superfast 3G network at 21 Megabits per second - the roll out is been done on equipment supplied by ZTE. Likewise, Yu completed its second phase of country-wide roll out, this time round on cell stations supplied by ZTE. ZTE is also reported to now be in charge of some of Orange's GSM core.
Recently Airtel surprised several analysts when it announced that Huawei is their partner for upgrade and roll out of its network in Africa. In India, Airtel's home country, the company partners with Ericsson, therefore it was expected that the same partnership will be extended to Africa -- as it had done with its other Indian partners notably IBM . However, it is worth noting that Chinese telecommunication firms were banned from supplying equipment in India till late last year due to a longstanding border row between China and India. Currently, Nokia-Siemens is the equipment supplier for Airtel-Kenya.
Econet presents the most curious case yet. The company, with three operations in Africa and with Zimbabwe as its home country is reported to have been facing a financial crisis due to the politically influenced fall in value of the Zimbabwe dollar. This left the company cash strapped, facing the need to upgrade its network back home and expand its Kenya operations. China came to the rescue by loaning Econet to enable them fund network upgrades and expansion. The loan, though welcomed, came with a condition -- Econet could only spend it on Chinese contractors. This saw ZTE edge out Ericsson.
With more than 183 mobile network operators in Africa, will see many similar cases - operators that badly need funds to expand on one hand, and China ready to offer the cheapest loans with restrictions on the spending.
The condition however is nothing new. Japan recently offered funds for the construction of a new port in Kenya. The project was soon mired in controversy about the cost of Japanese consultants on the projects. We have also heard of the controversial awarding of the railway expansion project to a Chinese firm without tendering by the Kenya Government. Kenya Railways had floated tenders for the project which were cancelled as all bidders listed quotes way above the budget. The second floating of the tender was cancelled as China offered to pick up the project , advising the government that it would not get a bidder within its proposed budget.
While most of the network planners have considered Ericsson's core platform equipment, including the billing and data platform, to be more superior to Huawei's or ZTE,many large telecoms continue partnering with Huawei. Safaricom has already upgraded its core network almost entirely on Huawei equipment.
Over time, ZTE and Huawei seem to have withstood the test of quality,even without the financial backing of their government. This though has not come smoothly. Various networks have had observable challenges when integrating equipment from separate manufacturers,which usually results in a few hiccups that might take a while to iron out. Yu (Econet) while successful in rolling out a nationwide voice network, subscribers were unable to use data services out of their initial network.
Safaricom took an even bigger gamble with such an upgrade to their network billing platform which had previously been on Ericsson .There were mounting complaints from Safaricom subscribers that they were getting billed without using any service, or getting subscribed to services that did not apply for. This persisted for several weeks before the matter was fixed. In one of the upgrades, the former CEO, Michael Joseph attributed the issue to a Linux bug that had not been experienced in earlier implementations elsewhere.
Corruption has been a trait that has cut across the board. Alcatel have in the past found themselves in hot water over bribing allegations with the firm agreeing to fines of$ 137.4 million as a result .Chinese firms have also found their names drawn in murky allegations. Former Safaricom CEO, Michael Joseph is on record saying that he faced a lot of pressure from three Kenyan ministers, including two from ministries not related in anyway to telecommunications, on cancelling a Huawei contract due to non-delivery. One of the ministers is said to have threatened to "cancel his work permit." The CEO was even more surprised on the spread of the news since he had just returned from cancelling the subject contract in China.
So what's the way ahead for NokiaSiemens, Ericsson and Alcatel Lucent? Given that their home countries such as Sweden are big development partners in Africa, will the changing times make it necessary for their governments to come to their protection? Should their home governments offer easy to access cash loans to mobile operators in Africa in a bid to offer a lifeline to their national heritage?
Will Sweden, Finland, Germany and France have to adopt a more aggressive model of funding for development projects in Africa? After all, if their tax payers have to give aid to another country, should the recipient country not be kind enough by helping them keep their jobs by buying and employing their kinsmen?
Is China helping entrench Huawei and ZTE through the use of subsidies?