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Friday
Jul262013

'No-names' drove Q2 handset market

Lesser-known feature and smartphone brands made the biggest gains in the second quarter, according to IDC.

Both Samsung and Apple fell back and Huawei slipped out of the top five as the lower prices of Android phones accounted for 42.4% of smarphone sales, compared with 36.4% in the previous quarter and 40.2% a year ago.

Just under 237 million smartphones were shipped, up 53% from a year ago. Samsung, Apple and LG remained the top three vendors, with Lenovo taking Huawei’s spot at fourth and ZTE retaining fifth position.

In the broader mobile phone market, 432m units were sold, with the top three – Samsung, Nokia and Apple – also losing market share to smaller brands such as Alcatel.

Said Ramon Llamas, a research manager with IDC's mobile phone team:

“Lower-priced smartphones continue to gain traction, but the key for vendors will be to keep prices low while still offering premium devices and services. We fully expect to see large-screen smartphones and other flagship devices establish a presence within the lower-priced smartphone segment as well."

Thursday
Jul252013

Spooks, spies and backup tape  

Gen. Michael Hayden’s lengthy encounter with the Australian Financial Review last week was unusual in itself.

Despite the appetite for spook-related stories these days, the most widely-reported part of the interview is the claim by the ex-CIA and NSA chief about Huawei's role in Chinese espionage.

What's telling is not the assertion, or the inevitable lack of accompanying hard fact; it's that the assertion itself is adequate.

Hayden tells the interviewer that Huawei “would have” shared its knowledge of foreign telecom systems with Chinese authorities.  Asked if evidence exists that Huawei has engaged in espionage on behalf of China, he replies (emphasis added):

Yes, I have no reason to question the belief that’s the case. That’s my professional judgement. But as the former director of the NSA, I cannot comment on specific instances of espionage or any operational matters.

Thus Huawei’s role as a security threat is reduced to a mere “belief”. Even within 'operational' constraints, if you have a case against someone, you will find a way to express it. And you would certainly put it with more conviction than the phrase above.

But Hayden does us an unintentional favour here by making it clear that Huawei is proscribed not because of what it's done but what it has the potential to do.

Hayden reveals that after retiring from the CIA he even received a pitch from Huawei in its search for Beltway advocates. According to Hayden, Huawei said all the right things: 

But God did not make enough briefing slides on Huawei to convince me that having them involved in our critical communications infrastructure was going to be okay. This is not blind prejudice on my part. This was my considered view based on a four-decade career as an intelligence officer.

He adds:

But frankly, given the overarching national security risks a foreign company helping build your national telecommunications networks creates, the burden of proof is not on us. It is on Huawei.

Leaving aside the ontological challenge of demonstrating that one is not a spy, this is the logic of the national security mindset. It takes a brave politician to challenge it and through the Cold War, the 'war on terror' and now the contest with China, it’s been the prevalent one in Washington.

The rest of world, including the telecom industry, has to live with it.  Telstra and PCCW are surely not the only operators to have signed pledges allowing the FBI access to their cables or to store data for its convenience.

But as this blog has suggested before, this logic makes suspects of all vendors.

In this part of the world, that puts the spotlight on Cisco. According to Ni Guangnan, a professor at the Chinese Academy of Engineers, Cisco provides 70%-80% of the backbone routers, international gateway nodes and super-nodes in the two biggest backbone networks, China Telecom and China Unicom.

In a widely-reported incident last October, Unicom swapped out Cisco routers for Huawei kit in what is said to be the world’s largest cluster node. Because of Cisco’s large installed base and the thousands of Cisco-qualified engineers, we won't see a rush to dump Cisco gear.

The Snowden saga has given China the ability to laugh off US complaints about its online data theft. Now the US national security case, as put by Hayden, is a script that China will faithfully adapt for its own purposes.

So stand by for the continued blocking of foreign telcos, more technology protectionism and the dextrous application of 'national security' to ensure China's networks are increasingly the preserve of the home team. 

Wednesday
Jul242013

Huawei boosts sales, trims disclosure 

Huawei says it’s on track to reach full-year targets but has trimmed its financial disclosures.

In the first six months of 2013, revenue reached 113.8 billion yuan ($18.54bn), up 10.8% over last year, Huawei said in a statement today

CFO Cathy Meng says the privately-held firm would reach its goal of 10% revenue growth for the full year, with a 7%-8% net margin.

But whereas last year Huawei’s mid-year guidance included operating profit and margin, it has omitted those from the 2013 statement.

Meng said growth was “steady” in the core carrier business and “fast” in the device group.

For full-year 2012 the Shenzhen-based vendor posted net earnings of 15.38 billion yuan on sales of 221 billion yuan ($35.35bn) – a margin of just under 7%.

Huawei is not obliged to issue any financial statements, but as part of its effort to burnish its image it publishes full-year and interim results and an annual report.

Wednesday
Jul242013

MIIT confirms 4G licence timetable

A senior MIIT official has confirmed the Chinese government aims to issue 4G licences by the end of the year.

At the ministry's half-yearly press conference today, Zhu Jun, the deputy head of the MIIT’s communications department, acknowledged the recent State Council decision on 4G but did not elaborate. He said the  licences would be issued “at the appropriate time."

Zhu said LTE trial networks in 15 cities had already been built out and spectrum had already been allocated, Xinhua reported.

The next step would to prepare the number resources, equipment certification and industry standards required for the licence issue, he said.

Monday
Jul222013

Chinese cellcos shape up for $49b 4G rollout: report

In the wake of the government decision to accelerate 4G licensing, Chinese operators have begun positioning themselves for a network rollout battle worth as much as 300 billion yuan ($49bn).

China Telecom is to launch its first 4G trial next month, while both Telecom and rival Unicom are reported to be planning to start network construction by year-end.

China’s State Council declared ten days ago that it aimed to issue 4G licences by the end of the year.

China Telecom will offer its first 4G service on its trial LTE network during the Asian Youth Games in Nanjing next month. It is official communications sponsor of the event and will deploy at major games venues, tourist spots and hundreds of official games vehicles.

Chairman Wang Xiaochu last month confirmed that the operator, which runs cdma2000 and EV-DO networks, would roll out nationwide with both FDD and TD-LTE flavours of 4G. FDD-LTE will provide broad coverage around the country, while TD-LTE will be used to provide extra capacity in densely-populated urban areas.

Previously both China Telecom and China Unicom had been bearish on 4G, most likely because of the desire to maximise the life of their 3G investments.

By comparison China Mobile has firmly embraced it and in the past 18 months has built trial networks in 13 cities. Last month it called tenders for a national 100-city rollout.

Now both Telecom and Unicom have now stepped up their network investment and rollout plans to bridge the gap, the Economic Information newspaper has reported.

China Telecom will expand its forthcoming LTE trial from four to 31 provinces, and is preparing to call tenders. 

China Unicom, which is expected to rollout exclusively with FDD-LTE, is still at the trial planning stage. However, its initial deployment is expected to be around 31,000 base stations.

China Mobile’s national tender calls for the deployment of 207,000 base stations, but this year is expected to invest 80 billion yuan ($13bn) in 180,000 cell stations.

Analysts say the allocation of licences will likely spark an intense competition for 4G coverage. Each of the three operators will build out approximately 200,000 base stations over the next three years, the Economic Information said, citing “multiple industry sources.”

At an average cost of 500,000 yuan per base station, the direct investment in construction could be as much as 300 billion yuan.