Huawei Technologies has partnered with the National Institute of Telecommunications (Inatel), to launch its Hana (Huawei Authorised Network Academy) training courses. The classes are focused on LTE networks and will help to increase the number of technical laboratories throughout Brazil, by training local students. BMI believes the move reflects a larger strategy to push for expansion in Brazil and throughout the Americas region, as it diversifies its presence into education, government and enterprise markets.
Huawei established its first office in the Latin America region in Brazil in 1999, although its regional headquarters are now in Mexico City. In June 2012, the company forecast revenues for its Brazil operations to reach US$5bn by 2016, an ambitious target as the whole of Huawei's Americas division accounted for a little more than US$5bn in 2012. The prediction followed the opening of a distribution hub in the Brazilian city of Sorocaba, consolidating its operations in 11 regional cities to cater to the growing Latin America market. The centre involved an initial investment of US$60mn but will allow the company to deliver more than 10,000 products a month by producing smartphones and tablets locally. The centre will be able to serve Peru and Chile, as well as Brazil's growing IT market ( see our online service, June 12 2012 'Chinese Firms Target Booming IT Services Market'). A US$300mn investment in a R&D facility in 2011 is another important example of the importance of Brazil to Huawei's strategic focus.
|Americas Division Experiences Slowest Growth|
|Revenue By Region, 2012 (CNYmn)|
In July 2012, Huawei was selected by the government to expand access to broadband internet to rural areas, in exchange for tax breaks, as the Brazilian government aims for universal access to telecoms services. With huge one-off sporting events in 2014 and 2016, and the Brazilian National Broadband Plan (PNBL), the government has been proactive in pushing forward with 4G LTE, benefiting vendors as operators are forced to upgrade networks to 4G. The government also requires that 60% of goods and products used in new networks be locally produced from 2012-2014, rising to 65% from 2015-2016 and 70% from 2017 to 2022. By launching its Hana training courses, distribution centre and R&D laboratory, Huawei should be able to ensure it meets these targets, and will provide benefits to its regional operations through consolidated operations.
The large geographic size of Brazil has led mobile operators to select more than one vendor to build its network infrastructure, with Huawei capturing contracts from three of the four largest companies. However, its main rival and global market leader, Ericsson, partnered with all four and continues to outperform Huawei in Brazil. Vice President of Ericsson's Latin America operations, Eduardo Ricotta, claimed that his company had a 45% market share of Brazil's 2G and 3G networks (compared to Huawei's 25%) and now has a 60% market share of 4G networks. Huawei's moves towards alternative investment strategies can therefore be viewed as an attempt to usurp Ericsson's position in the market, by diversifying its revenue streams into other ventures.
One such division that will help Huawei reach its US$5bn target for Brazil and help it to compete with Ericsson is the growth of its Enterprise business. This unit saw its revenues increase by 25.8% during 2012 across the group, with the launch of cloud computing products and datacentres, for example. We expect to see Huawei deploy similar strategies in Brazil, as it looks to capitalise on a growing demand for data storage, retrieval and management in the country.
The company's Americas division contributed the lowest amount to the group's revenue and experienced the lowest growth rate, at just 4.3% in 2012. This is likely to be impacted further following a March 2013 'cyber-espionage' ruling in the US, which would restrict the purchase of equipment from Chinese vendors by certain government departments. BMI believes Huawei's diversified investment strategy in Brazil will attempt to mitigate some of the damage this ruling may have on revenues in its Americas division, while strengthening its presence in the region.
|Telecoms Operator||Selected Vendor|
|Telefónica/Vivo||Ericsson and Huawei|
|TIM Brasil||Ericsson, Huawei and Nokia Siemens|
|Claro||Ericsson and Huawei|
|Oi SA||Alcatel-Lucent, Ericsson and Nokia Siemens|
|SKY Brasil||Nokia Siemens|
|On Telecoms/ Sunrise||Huawei|