Surprise – Huawei Wins China Mobile Converged Network Contract
China Mobile (601728.CH) is the world’s largest telco by subscribers (945.5m as of 6/2021). As such, they let some of the biggest telecom projects globally, all of which are within China or Hong Kong. Earlier this year China Mobile let an equipment contract for its 5G 700MHz network project worth a maximum of 7.5b yuan (~$1.16b US), which was won by Huawei (pvt), and strangely enough China Mobile has just awarded the service part of contract to, you guessed it, Huawei, which would total out the project at ~$2.32b US. Huawei does have to share both contracts with local competitor ZTE (000063.CH) at a 50/50 split, but the totals are large enough that even 50% of the deal is a significant amount.
While the equipment part of the contract was open to competitive bidding, the service segment was only open to two bidders, Huawei and ZTE in order to maintain brand support service for the equipment, but there was likely a bit of a bias toward using Huawei and ZTE as they both remain on the US trade sanctions list and have seen their global telecom business severely limited by US pressure. While open bidding procedures were used for the equipment part, it seems that unless Huawei and ZTE were going to low-ball bids, they were going to get the contracts, as while China Telecom has publicly trading shares, the company is actually state owned, and therefore directed by the government toward serving the good of the people, which in this case means keeping Huawei’s and ZTE’s telecom businesses strong despite US intervention. It’s nice to have a population of 1.45b behind you, even if they don’t know they are.
While the equipment part of the contract was open to competitive bidding, the service segment was only open to two bidders, Huawei and ZTE in order to maintain brand support service for the equipment, but there was likely a bit of a bias toward using Huawei and ZTE as they both remain on the US trade sanctions list and have seen their global telecom business severely limited by US pressure. While open bidding procedures were used for the equipment part, it seems that unless Huawei and ZTE were going to low-ball bids, they were going to get the contracts, as while China Telecom has publicly trading shares, the company is actually state owned, and therefore directed by the government toward serving the good of the people, which in this case means keeping Huawei’s and ZTE’s telecom businesses strong despite US intervention. It’s nice to have a population of 1.45b behind you, even if they don’t know they are.
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