Telecoms: ZTE, Apple and China Mobile 电信业：中兴、苹果和中国移动
A wide range of buzz is coming from the telecoms space, led by more reverberations from Washington’s controversial decision to lock out Huawei and ZTE (HKEx: 763; Shenzhen: 000063) from the US telecoms equipment market. China’s 3 major telcos are also making the headlines for other reasons, as they continue to jostle for position in both the 3G wireless and also the fixed-line broadband spaces.
Let’s start off with Huawei and ZTE, the latter of which has issued yet another statement as it continues to deny that its equipment poses any security threat to US telecoms networks due to its ties with Beijing. (company statement) This latest statement is largely cool and rational, maintaining ZTE’s previous calmer responses to this growing crisis, even as Huawei has issued more strongly worded statements criticizing the US decision.
ZTE statement points out that Washington’s biggest concern is the potential for future meddling by Beijing rather than any existing flaws with its products. But as I said yesterday, that potential is very real and Chinese companies are often powerless to resist such interference. That means such a risk will continue to exist until Beijing can find a way to demonstrate it is willing to let private companies operate free of government meddling. (previous post)
In a potentially ominous development following the US decision, media are reporting that Canada has also hinted that it could soon follow a similar course and stop the import of Chinese telecoms equipment. (Chinese article) Even more worrisome would be the potential for European governments to also follow that lead — a development which seems likely — since both Huawei and ZTE now get a significant portion of their revenue from Europe.
Moving on to other telecoms matters, there’s also an interesting report saying China Mobile (HKEx: 941; NYSE: CHL) is seeing its efforts to get a fixed line broadband license delayed by what looks like bureaucratic maneuvering by the nation’s other 2 major telcos, China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU), which also happen to have a duopoly on China’s fixed-line broadband market right now. (Chinese article)
I’ll admit that I don’t completely understand the reports, but the bottom line seems to be that Unicom and China Telecom are using the issue of interconnection fee reform to delay China Mobile’s receipt of a license. Still, I would expect China Mobile to eventually receive a license in this lucrative space, since Beijing has previously indicated it wants to break the fixed-line broadband monopoly now held by Unicom and China Telecom. Look for some resolution on this issue probably in the first quarter of next year, opening up a potentially big new revenue source for China Mobile.
Lastly, media are also reporting that some provincial units of China Telecom and Unicom have begun taking pre-orders for Apple’s (Nasdaq: AAPL) latest iPhone 5. Apple enthusiasts and almost anyone else will know the iPhone made its global debut more than 3 weeks ago, but it has been unavailable through official channels in China due to broader incompetence by these 2 telcos, especially Unicom. (Chinese article; previous post)
The latest reports only say the new iPhone will definitely be available by year end, and a Unicom insider “boasts” his company will sell the phone before China Telecom. In my view, it’s a bit of a disgrace that neither company was organized enough to get included in the new iPhone’s global launch. That will ultimately cost both carriers big money in lost sales, as much of the iPhone buzz will be gone by the time either company can finally offer the latest Apple smartphone on its network.
Bottom line: Huawei and ZTE are likely to see their telecoms equipment banned from a growing number of western markets, following a US decision that their products pose a security risk.
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