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Huawei Technologies Sees African Revenue Growing Up to 30%

November 13, 2012

Huawei Technologies Sees African Revenue Growing Up to 30%

Huawei Technologies Co., China’s largest phone-equipment maker, said revenue in southern and eastern Africa may climb as much as 30 percent in the next three years as growth on the continent outpaces most regions. Photographer: Per-Anders Pettersson/Getty Images

Huawei Technologies Co., China’s largest phone-equipment maker, said revenue in southern and eastern Africa may climb as much as 30 percent in the next three years as growth on the continent outpaces most regions.

The company plans to capitalize on low mobile-broadband penetration rates and increasing demand for smart phones in Africa, Li Dafeng, president for eastern and southern Africa, said in an interview in Nairobi, the capital, on Nov. 7. Huawei, based in Shenzhen in southern China, will also focus on developing its enterprise business that supplies equipment to governments and companies, he said.

Africa has less than five mobile-broadband subscriptions per 100 inhabitants, compared with more than 10 percent in the rest of the world, according to the International Telecommunications Union, a Geneva-based industry group. Over the next five years the continent is expected to be the fastest growing region in terms of mobile-phone connections, according to A.T. Kearney, a Chicago-based consultancy.

“There is still much room to grow, so we can see that in the next three years network availability will be improved greatly,” Chief Technology Officer for East & Southern Africa Region Radoslaw Kedzia said at the interview. “This is why we can grow 20 percent to 30 percent.”

Economic growth in sub-Saharan Africa is expected to accelerate to 5.7 percent next year from 5 percent this year, outpacing every other region except developing Asia, the International Monetary Fund said last month.

Angola, Kenya

Huawei’s southern and eastern African business comprises 25 countries including South Africa, Angola and Kenya. The company posted revenue from Africa of $3.42 billion in 2011, up 15 percent from 2010, Li said. Total sales in Africa account for 13 percent of global revenue, the company said in an e-mailed statement.

“If you look at the penetration of mobile broadband compared to European countries or compared with China, there is a lot of potential,” Li said. “In my region, the penetration of smart phones is 10 percent. In China, mobile broadband penetration is 30 percent, in Europe it is more than 50 percent and 16 percent in Kenya. So there is still a lot of potential.”

Nigeria, Africa’s most-populous nation, is Huawei’s biggest market for its carrier division on the continent, which supplies equipment to mobile-phone companies, Kedzia said.

South Africa

In South Africa, the continent’s largest economy that contributes 30 percent of the company’s African revenue, Huawei plans to grow market share as the country seeks to achieve 100 percent broadband penetration by 2020, Li said.

Huawei sold 20 million smart phones globally in 2011 and estimates it will sell another 60 million units this year, earning revenue of $9 billion, he said.

“Huawei’s IDEOS, the first under-$100 smart phone, has become popular in the region, gaining a market share of 45 percent in Kenya,” Li said. “We have sold 250,000 pieces since its launch last year.”

Globally, Huawei is the third-biggest maker of smartphones by sales, according to data from the company. It sold 16 million units in the third quarter compared with 27 million by Apple Inc. (AAPL:US) and 56 million by Samsung Electronics Co. (005930), the market leader.

The U.S. Congress last month said Huawei and ZTE Corp. (763), China’s second-biggest telephone equipment manufacturer, provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying. A report by the House intelligence committee report said the companies failed to explain their relationship with the Chinese government. Li rejected the criticism.

‘No Links’

“Huawei is just a telecommunications manufacturer, we have no link with government,” Li said. “The only relationship between Huawei and the government is the business. We provide some solutions, some products, this is the only relationship.”

Huawei’s customers in eastern and southern Africa include South Africa’s five mobile operators, including Vodacom Group Ltd. (VOD) and MTN Group Ltd. (MTN) Other clients are Angola’s Unitel SA and Movicel Telecomunicacoes Lda and Safaricom Ltd. (SAFCOM) of Kenya, East Africa’s biggest mobile-phone operator.

The company has a research and development center in South Africa and seven training facilities in the region, including the Democratic Republic of the Congo, Egypt and Morocco. The company has helped 18 African governments build networks in countries such as Nigeria, Kenya, Uganda, Senegal, Angola, Guinea, and Djibouti.

The company also plans employ more local workers on the continent to boost the ratio of domestically hired employees to 70 percent from 60 percent, Li said, without saying by when.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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