Chinese dragons fly into the UK’s mobile warzone

Steve Dinneen
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ASK someone to name the first smartphone that comes into their head and most people will say “iPhone”. Some might name a Samsung or even an HTC. Not many will mention Huawei or ZTE. But 2012 could be the year of the dragon, with the Chinese giants preparing to blitz the UK with a massive product and publicity drive.

ZTE and Huawei – the second-largest telecoms firm in the world with global revenues of $28bn (£18.11bn) – have been steadily growing their presence in the UK over the past decade.

Huawei signed a deal with BT in 2005 to deploy its next generation network and transmission equipment and last year it penned a contract worth hundreds of millions with Everything Everywhere to upgrade its 2G network. It is now a front-runner to win the contract to upgrade the network for 4G after the government auctions off new slices of mobile spectrum later this year.

Huawei had also “gifted” £50m towards the development of a mobile network in the London Underground before the project collapsed. ZTE has its fingers in similar infrastructure pies, including the rollout of high-speed broadband to rural areas. Their reach extends across the pond to the US and throughout mainland Europe, with a string of announcements over the last 12 months. Its strengthening grip over global telecoms infrastructure has prompted some security fears and led to a US House of Representatives’ intelligence committee probe.

But it is the consumer market that looks set to see the biggest movement this year. ZTE opened a major network testing and development centre in London Docklands last year and Huawei will open its European design hub in London in the first quarter of 2012.

Handsets are nothing new to either firm – chances are you have seen, or even owned, a Huawei or ZTE phone without realising it. They produce white label devices for other companies, which is how Taiwanese manufacturer HTC started before it became one of the biggest players in the industry. Orange’s budget smartphone the San Francisco, for example, is a re-branded ZTE Blade – one of the biggest selling smartphones in the world, selling in the region of 5m last year. The Android-based device is the most popular handset in China, averaging 16,000 activations every day. Overall ZTE shifted 35m phones in the first half of 2011 alone, a 400 per cent increase on the previous year.

Now they want to emulate that success in the lucrative, high margin UK market. Huawei already has two (modestly selling) UK released own-brand handsets in the Blaze and the Vision, and ZTE is tipped to unveil one at the Consumer Electronics Show this week.

Any new products will be backed by the weight of some of the biggest marketing budgets in the industry, not to mention a formidable lobbying operation.

George Osborne was the guest of honour at the Orange national business awards in November. Following his speech, two Huawei representatives immediately swooped and, almost with a hand under each armpit, dragged him off for a meeting with their UK chief executive Victor Zhang. With influence like that, Huawei and ZTE are the telecoms companies to watch this year.

Steve Dinneen is City A.M.’s deputy lifestle editor