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China's Huawei expects $2 billion in 4G revenue this year

A man looks at a Huawei mobile phone as he shops at an electronic market in Shanghai January 22, 2013. REUTERS/Carlos Barria
A man looks at a Huawei mobile phone as he shops at an electronic market in Shanghai January 22, 2013. REUTERS/Carlos Barria

By Lee Chyen Yee

SINGAPORE (Reuters) - Huawei Technologies Co Ltd expects to take in more than $2 billion in revenues selling 4G gear this year as global carriers from China to Europe expand their networks, senior company executives said on Wednesday.

Even though 4G LTE (long-term evolution) promises faster video streaming and Internet downloads, the cost of smartphones would need to come down before the technology can enter the global mainstream, they told reporters in a briefing.

"The price of LTE smartphones is still higher that those without LTE technology. This is normal," said Peter Zhou, executive vice president for the LTE business unit at Huawei, the world's No.2 telecom equipment maker ranking behind Sweden's Ericsson.

There are 100 million 4G LTE users globally now, which makes up a small fraction of total mobile subscribers. That 4G number will grow to 1 billion in 2016, or more than half of total global subscribers, Zhou said.

"We foresee that around 2015, a multi-mode smartphone, which includes LTE, will be very similar or equal to the price of a (usual) smartphone," Zhou said. "So by that time, the portion of LTE smartphones will be much bigger."

Infrastructure spending in 4G LTE will nearly triple to $24.3 billion in 2013 from $8.7 billion in 2012, according to research firm IHS iSuppli, fueled by network expansions in major markets such as China, Japan and Germany.

So far, Huawei and Ericsson have a combined share of 74 percent of allocated LTE contracts, Huawei executives said, citing data from research firm Informa.

Huawei's LTE revenues were insignificant last year, but grew quickly to $1 billion in the first half of the year. They are on track to hit more than $2 billion for the whole of 2013, said Bob Cai, vice president for Huawei's wireless marketing.

With slowing economies in mature markets like Europe, China is seen as a bright spot for wireless growth, especially with China Mobile Ltd spending more on its 4G network as it is expected to get a license this year, analysts said.

So far, Huawei and rival ZTE Corp have secured more than half of China Mobile's initial 4G contracts worth around 20 billion yuan ($3.2 billion), with the rest going to Ericsson, Alcatel-Lucent SA and Nokia Siemens Networks, sources said August.

China's 4G licenses are expected to be based on TD-LTE technology, rather than FDD-LTE, which is more widely used globally. However, analysts said there was a chance that the Chinese government could award FDD-LTE licenses in the future.

"If the government decides that it is going to award FDD-LTE licenses as well later next year, that business will continue rapidly into 2015 as well," said Neil Juggins, a regional telecoms analyst for Hong Kong-based JI Asia, an affiliate of Societe Generale. "I think China is going to be an increasing portion of their (Huawei's) global business over the next three years."

China is the world's largest wireless market with more than 1 billion subscribers, but only a fifth of them use 3G technologies and the rest on 2G.

Even though telecom spending is largely flat in Europe, carriers there are pouring more resources into 4G. [ID:nnL5N0CZ1JS]

"Clearly capex on an individual operator basis is flat in Europe. It is not growing on an annualized basis. But the direction of that spending is obviously moving more towards LTE than 2G and 3G networks," Juggins said.

(Corrects para 7 and bullet point with Informa clarifying that 74 pct refers to LTE allocated contracts and not overall 4G market)

(Editing by Matt Driskill)

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