1. NETWORK BUSINESS QUARTERLYSMHuaweiFourth Calendar Quarter 2010Fourth Fiscal Quarter 2010 Ended Dec. 31, 2010TBR OUTLOOK - POSITIVE TBR SCORE (0-10 SCALE) 4.79Publish Date: March 21, 2011Author: Chris Antlitz (chris.antlitz@tbri.com), NBQ AnalystContent Editor: Michael Sullivan-Trainor, NBQ Executive Analyst TBRT E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .

2. Contents TBRCompany Analysis Company Data Models3 Executive Summary24 Income Statement7 Strategy Overview25 Balance Sheet11Corporate SWOT Analysis26 Revenue Model14Financial Model Strategy 27 Geographic Model17Go-to-Market & Product Strategies28 Operating Expense Model18Alliance & Acquisition Strategies29 Forecast Model19Geographic Analysis30 Financial Graphs21Resource Management Strategy 33 Go-to-Market & Resource Mgmt. Graphs22Future Outlook 34 Acquisitions Table 35 Strategic Alliance and Partnerships Table 37 Product Announcement Table 40 Customer Deals Table 50 Facilities Table 52 Management Table 53 About TBR2 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 3. Executive Summary TBRHuawei successfully weathered the decline in Chinese spend for 3Grollout in 2010, making up for it with solid execution in EMEATBR Position:Huawei is striving to drive software and servicesTBRHUAWEI REVENUE BY REGION $454revenue to maintain its lofty growth rate. $28,000 North TBR estimates gross margin rose 40 basis points $24,000 $408$9,912America Revenue in Millions from 2009 to 40%, as sales mix moved toward $20,000 $231EMEA higher-margin software, services and next- $6,500 $16,000$6,040 $1,820 generation infrastructure. $146 $923CALA $12,000 $4,399 $3,843 $6,014$1,539 The device business rebounded sharply fromAPAC (ex-$8,000$900 2009 on strong unit shipments and a more $5,743 China) $3,799 $10,147$9,800 favorable mix skewed toward smartphones. $4,000$4,518 China $3,595 Huawei benefited from the revival in optical $02007 20082009 2010 Est. transport spend, but TBR believes the vendor SOURCE: TBR ESTIMATES AND HUAWEI trailed Alcatel-Lucent and Ciena in the space in 2010. We believe Huawei is exercising its generousHuaweis Corporate Strategies credit lines with Chinese banks to offer attractive financing to cash-strapped operators in Execute on three-pronged security plan in U.S. to developing countries. As such, TBR estimates assuage government fears Huawei will grow sales faster than peers in CALA Triple terminal sales within three to five years by and Africa, where access to capital is scarce, manufacturing and bringing to market low-cost especially for large-scale deployments.smartphones and tablets sporting the Android OS Huawei is using resource localization to establish Establish leadership position in 4G, particularly TD-LTE hubs in key markets and make customers more Invest in software and services assets to better comfortable using a foreign vendor for their compete against Ericsson, Alcatel-Lucent, and Nokia network needs. Siemens3 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 4. Executive Summary TBRThough Huawei has won the largest number of 4G contracts thus far,rivals Alcatel-Lucent and Ericssons LTE contracts are worth moreQuarterly Segment Performance 2010GrowthSegment Key Changes & DriversRevenue Trends to MonitorY/Y Estimate Huaweis launch of a SingleRAN thatHuawei is ahead of rivals in number supports both TD-LTE and WiMAX could beof 4G deals signed, but the value of a hot seller for WiMAX operators looking forthose deals pales in comparison to $8.5a relatively inexpensive way to migrate toWirelessthe lucrative LTE contracts won bybillion34.3% LTE. Some examples include Clearwire andAlcatel-Lucent and Ericsson for Yota. This could also expand the TD-LTEAT&T, Verizon and other Tier 1 ecosystem, which is currently running theoperators. FDD-LTE iteration of the 4G technology.Huawei continued to grow FTTxdeployments with numerous deals. Huawei has strong FTTx offerings andIn 2H10 alone, Huawei won twoprovides reliable, quality accessFixed deals for FTTH deployments, one$2 billion 27.7%equipment at better prices thanwith Telekom Brunei Berhad incompetitors.Brunei and the other with Qtel in Huawei also leads in GPON and EPON.Qatar. Huawei will benefit from BTs decision toThe largest optical deals Huawei increase fiber investment by 1 billion ($1.5signed in 2H10 were with China $5.8 OpticalMobile and PCCW for 40G billion12.9%billion) through 2015, as the vendor has been a key supplier of optical access andsolutions. transmission equipment to BT since 2008.4 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 5. Executive SummaryTBRData was the fastest-growing segment in 2010, as operators boostedcapacity on their networksQuarterly Segment Performance 2010GrowthSegment Key Changes & DriversRevenue Trends to MonitorY/Y Estimate Demand for routers was strong in 2010, exemplified by MegaFons purchase of an Operators are stressing efficiency on a IP/MPLS solution from Huawei in cost per bit basis, as revenue derived October.$2.4from data is growing at a far slower rateDatabillion57.1% than data usage. This trend bodes well Operators are allocating a larger portion of their capex budgets to IP to bulk up for sales of Huaweis SingleRAN, network capacity to contend with rising backhaul and IP solutions. data usage. Huawei realized strong growth across rollout, maintenance, professional andHuawei is bulking up its services arm to managed services. Being selected forbetter compete against heavyweightsServices end-to-end network deployments and/or Ericsson, Alcatel-Lucent and Nokia upgrades is helping Huawei drive$4.9& billion34.5%Siemens for lucrative outsourcingSoftware incremental growth in services. contracts; however, it will be some time Traction in software remains elusive, before Huawei can undertake a mega- though Huawei is investing aggressively services deal. in its portfolio. IDEOS will be offered by carriers and IDEOS smartphone series launched in $4.5retailers in more than 70 countries inTerminalsSeptember and sold 1 million units in firstbillion21.6% 2011, helping Huawei quickly gain two months. market share.5Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 6. Executive SummaryTBRHuaweis balance sheet is stretched compared to peers, reflecting liberalcredit policies, inefficient inventory management and a rising debt load CALENDAR QUARTER RESULTSTBR SCORING SUMMARY:TBRCompanyAverage in Standard 4Q09 1Q10 2Q10 3Q10 4Q10FINANCIAL METRICSTBR ScoreFigure Class Deviation/2Fi na nci a l Model Stra tegy: 5.67 5.55 5.64 5.74 5.80Revenue Growth Yea r-to-Yea r8.44 28.3%9.0%5.6%Go-to-Ma rket & Servi ces Stra tegi es : 3.27 3.21 3.35 3.51 3.35 Revenue/Empl oyee3.53 $ 229,694 $ 383,236$104,419Res ource Ma na gement Stra tegy:5.29 4.92 4.93 5.27 5.24 Gros s Ma rgi n5.52 40.0% 37.3%5.2%TOTAL AVERAGE TBR SCORE: 4.74 4.56 4.64 4.84 4.79 SG&A a s % of Sa l es4.74 17.9% 17.3%2.2%R&D a s % of Sa l es 6.65 10.0% 13.1%1.9%Huawei has the weakest days sales outstanding Opera ting Ma rgi n6.27 11.9%6.4%4.3%metric among its peers due to its liberal creditDa ys Ca s h Outs tandi ng 3.9870.60115.04 43.59Total As s et Turns6.991.160.910.13policies. Huawei routinely accepts IOUs fromCurrent Ra tio 3.781.481.760.23customers to boost sales and encourageDebt/As s ets2.160.690.520.06investment. We believe this practice couldReturn on As s ets 8.11 14.2%5.6%2.8%weaken Huaweis balance sheet if cash-Return on Equi ty9.42 45.6% 13.3%7.3%strapped operators struggle to pay back TOTAL AVERAGE TBR SCORE5.80outstanding debt. CompanyAverage inStandard KeyGO-TO-MARKET & SERVICES METRICSTBR ScoreFigureClassDeviation/2Network/Comm. Equi pment Ma rket Sha re5.37 13.7% 12.2% 3.9% Represents an area where Huawei is Mobi l e Phone Ma rket Sha re3.662.2% 10.2% 6.0% currently challenged versus peers. Da ys Sa l es Outs tandi ng1.01 154.9680.19 18.74 Represents an area where Huawei is TOTAL AVERAGE TBR SCORE3.35 outperforming its peers. Represents an area where Huawei isCompanyAverage inStandard neither significantly outperforming norRESOURCE MANAGEMENT METRICSTBR ScoreFigureClassDeviation/2 underperforming its peers. Inventory Turns /Yea r 3.996.218.13 1.90Fi xed As s et Turns /Yea r6.4819.1114.59 3.04 VENDOR PERFORMANCE COMPARED TO PEERS IN TBRS NETWORKTOTAL AVERAGE TBR SCORE5.24 BUSINESS QUARTERLY VENDOR BENCHMARK 6 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 7. Strategy OverviewTBRHuaweis three-pronged security strategy is a good first step to reducebarriers to expansion in the United States marketFunction Key Strategies TBR Assessment Build on initial success Huawei has yet to land an equipment contract with a Tier 1 in North America to operator in the United States, though the vendor is findingOverallbecome a key suppliersuccess among Tier 2 and 3 companies. to network operators With security clearance in hand, Huawei can realize the full Grow business in India potential of its extensive resources in India, which include a by localizing presence skilled local workforce and domestic manufacturing and R&Dassets. Huaweis plan includes establishing a national security committee Employ three-prongedheaded by Huawei CTO Matt Bross, using third-party test labs to security strategy to check Huaweis source code, and using U.S. citizens to deliver and allay U.S. concernsinstall Huawei equipment. Grow sales 20% in 2010 Huawei exceeded its sales target for 2010 by $1.8 billion, and TBR by focusing on estimates broad sales growth in all of Huaweis operatingFinancialinternational expansionsegments. TBR estimates Huawei boosted its R&D spend to 10% of revenuein 2010 after spending just under 9% of sales in the previous two Invest 10% of revenue years. The jump reflects confidence in the global economic in R&Drecovery and a strong push into services and software. Huawei isalso investing heavily in TD-LTE.7Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 8. Strategy OverviewTBRHuawei is investing heavily in North America and India to support growth Function Key StrategiesTBR Assessment Huawei won the largest share of the LTE and WiMAX contractsawarded in 2010 and is positioning itself to become a leader in Establish leadership Go-to- TD-LTE, the 4G technology of choice for Chinese operators. The position in 4G (WiMAX Market vendor aims to double its commercial LTE contracts from 18 in and LTE)2010 to 36 in 2011 and expects LTE-related revenue will becomea meaningful contributor to overall revenue by 2014. Selling low-cost Android powered devices via carriers will helpHuawei quickly gain market share in smartphones and tablets. Leverage Android toiPad and Xoom are not affordable by the general population of gain traction in most countries and offerings by Samsung and LG seek to capture smartphone and tabletthe midmarket. This leaves the low tier up for grabs, a space marketsHuawei thrives in due to its low-cost operating structure andresistance to pursuing expensive advertising programs. Huawei opened an R&D center in Ottawa in August the vendors Establish R&D centers insecond R&D facility in North America. This base of operations in R&D and strategic cities toCanada will help Huawei develop closer ties with its local Deliveryleverage local talentcustomers, including BCE, SaskTel and TELUS as well as help the Strategypoolscompany enter the good graces of the Canadian government. $2 billion investment in Using a localization strategy, Huawei is creating a stronghold in India will improve India while improving its reputation with the Indian government. prospects in the country8Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 9. Strategy Overview TBRLocalization is central to Huaweis India strategy a move that will helpimprove its reputation with government officials while saving moneyTBR Assessment of Huaweis Resource Management Strategy With security clearances in hand and 3G deals secured, Huawei unveiled an India investment plan worth $2 billion over the next five years. The strategy is to quickly build a standalone base of operations in India. Huawei will leverage the talent pool and localize service delivery and equipment manufacturing to establish a stronghold in the country, which will alleviateHuaweis government fears and help Huawei keep costs down.$2 billion A manufacturing hub will be built near Chennai for $500 million. It will produce networkinvestment showsinfrastructure equipment for India and export to neighboring countries.the vendor views The existing R&D center in Bangalore will expand to house 3,000 engineers, up from thethe Indian marketcurrent 2,000.as a strategic,long-term Partnerships with Indian IT firms will be funded to better approach and offeropportunity differentiated solutions to the market. R&D budgets will rise to take advantage of the highly educated talent pool. Training centers will be established to coach new hires and channel partners. These investments will boost Huaweis India headcount from 6,000 at the end of 2010 to over 10,000 by the end of 2011, with more than 60% to be local hires.9 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 10. Strategy OverviewTBRHuawei will come to dominate the low-end smartphone and tabletmarkets in 2011 TBR Assessment of Huaweis Go-to-Market Strategy Huawei is clearly focused on locking up the low-tier smartphone and tablet markets. Thestrategy is to mass-produce a limited number of models that are widely affordable andappealing to many demographics. Huawei is able to sell its devices at a discount Bringing Android-compared to rival offerings because of its low-cost operating structure and resistance to poweredexpensive advertising campaigns. Instead, Huawei prefers to let carriers and retailers smartphones andhandle the marketing portion and sweeps those cost savings to the bottom line, which tablets at a fractionhelps protect margins. of the cost of rivals Huawei is also making inroads to big box retail stores like Best Buy and Wal-Mart. The offerings to U.S.popularity of Android smartphones and tablets is pushing retailers to offer the widest shores will resonate and most competitive selection of mobile devices. with mass market consumers, helping TBR believes ZTE will be Huaweis only significant competitor in the low-end space. make Huawei aApple clearly owns the high end and RIM, Samsung, Nokia, Motorola and others are all household name jockeying to grab share in the mid- to high-end segments. With competitors focused on balancing ASP and volume, Huawei is able to move in andquickly ramp-up unit shipments; however, TBR forecasts Huawei Device to have anexcellent year in 2011.10Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 11. Corporate SWOT Analysis TBRNokia Siemens is Huaweis biggest threat from the West, as it iswilling to compete against the Chinese on price to win market share Strengths Opportunities Leader in 4G technologies by number of contracts Supply TD-LTE market SingleRAN platform is a key differentiator for Use strategic partnerships to build expertise and winning contracts in developed regionsenter new markets Able to provide vendor-linked financing through Utilize Service Delivery Platform to establish Web ties to state-run banks in China2.0 leadership Low operating costs support low-cost pricing Establish a foothold in the North American market strategy Extensive installed base of Tier 2 & 3 telecom operators in emerging markets WeaknessesThreats Need to add capabilities fast to match incumbent Nokia Siemens prioritizing market share gains over NEPsprofitability puts downward pressure on contract Increasing size brings a challenge to maintaining pricing historical efficiency Reshuffling of Chinese telecom industry could Relatively small managed services basedampen Huaweis growth prospects in home market Ties to Chinese government could limit international investment opportunities Tighter monetary policy by China could limit Huaweis domestic growth Lack of United States presence11 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 12. Corporate SWOT AnalysisTBRThe partnership with Sequans and the unveiling of a dual-mode TD-LTE/WiMAX SingleRAN base station show Huawei is serious about TD-LTEOpportunity: Supply TD-LTE market Huawei is positioning itself to become a leader in TD-LTE, the iteration selected by Chinese operators for their 4G migration. In 4Q10, Huawei partnered with Sequans Communications to develop and commercialize TD-LTE hardware for the global marketplace and unveiled a new version of SingleRAN that supports both WiMAX and TD-LTE. Unlike FDD-LTE, which uses paired spectrum, TD-LTE uses unpaired spectrum channels.Huawei standsThough TD-LTE is slightly less efficient at transmitting data than FDD-LTE, the version givesto be a keyoperators greater flexibility to use varying frequencies when operating their 4G network.beneficiary of Unpaired spectrum is also much less expensive than paired spectrum, which incentivizes itsTD-LTE-related use by operators.contracts,especially as A push to develop TD-LTE in China has helped the technology catch up with FDD-LTE, makingWesternit a contender for commercial deployment. While European and North American operatorsvendors focusare likely to go with FDD-LTE, TBR believes TD-LTE will be the standard of choice in China,on the FDD Russia and India, where local vendors like Huawei and rival ZTE will push their version of theversion of the technology and where operators can find meaningful cost savings in the use of unpairedtechnology spectrum. Though the Chinese government has been quiet regarding 4G license allocation, the big three Chinese telcos have all begun formulating their 4G ambitions. TD-LTE trials are slated to begin in 2011 and both Huawei and ZTE stand to be key beneficiaries of this next investment cycle to 4G in APAC, especially since Western vendors are almost completely focused on FDD- LTE to service their core customers.12 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 13. Corporate SWOT Analysis TBRHuawei is at a crossroads, as its historical focus on network deploymentmust shift to software and services to further grow Tier 1 accountsWeakness: Need to add capabilities fast to match incumbent NEPs Huawei is becoming a mature company. Though sales were strong in 2010, TBR believesHuaweis growth rate will moderate in the coming years as it becomes more difficult to growrevenue off a larger base. Huawei has built its empire on the mantra of fast deployment of low-cost, high-qualityproducts. While this strategy has been extremely successful thus far, the company now findsitself at a crossroads and must adapt to be successful in the future. With India representing the last large market for new network deployment, long-termrevenue growth will come primarily from services and software two areas Huawei lagsHuawei may pursue compared to incumbent NEPs like Alcatel-Lucent, Ericsson and Nokia Siemens.alliances and/or Though Huawei is making strides in its services and software capabilities and offerings,acquisitions toaddress its relativemuch work remains to be done in cultivating customer relationships and building outweakness in software platforms and multimedia solutions that service providers will feel comfortableservices andadopting in their back-office systems.software In services, Huawei is making progress in product-attached maintenance but lags inmultivendor, primarily due to a relative lack of expertise in dealing with rivals systems.Professional services is another weak area for Huawei, one that includes a range ofcommoditized to highly specialized services. Huawei is trying to address the commoditizedarea with its new iCare solution. In software, Huawei unveiled its Digital Shopping Mall in response to the popularity ofmobile applications; however, Huawei lags behind Alcatel-Lucent in applications, particularlyin enablement, and lags Ericsson in video all important spaces that will be long-termgrowth drivers.13Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 14. Financial Model StrategyTBRGross margin improved in 2010 on favorable sales mix, but 2011 willpressure margins as 3G rollout activity ramps up in IndiaRevenue Huawei blew past its guidance of $26.2 billion for TBR HUAWEI PROFITABILITY AND GROWTH2010, attaining $28 billion in revenue, up 28.3% from $30,00060%2009. $25,00050% In Millions USD Given that Huawei historically issues guidance that is$20,000 40%in line with actual figures, this outperformance$15,000 30%speaks to the underlying strength of the service$10,000provider industry. $5,00020% $010%Expense200620072008 2009 2010 Est. TBR believes Huawei spent $2.8 billion on R&D inTotal Revenue Gross ProfitOperating ProfitYear-to-Year Revenue Growth2010, matching the companys historical target spend SOURCE: TBR ESTIMATES AND HUAWEIof 10% of total revenue. SG&A grew an estimated 43.4% year-to-year asHuawei beefed up advertising and sales departmentsTBRGROSS MARGIN & OPERATING MARGINto meet strong demand in developing regions. 50% 40.0% 36.2% 38.2%39.7%39.6%Margin 40% Gross margin rose 40 basis points from 2009 to 40% 30%as sales mix skewed more toward higher-marginsoftware, services and next-generation hardware. 20%12.9%14.1% 11.9%7.3% 9.7% Operating margin fell 230 basis points year-to-year to 10%11.9%, as Huawei boosted spending on R&D and 0%SG&A to fund innovation in areas such as TD-LTE and 2006 2007 20082009 2010 Est.applications as well as better align its salesGROSS MARGINOPERATING MARGINSOURCE: TBR ESTIMATES AND HUAWEIdepartment with market demand.14Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 15. Financial Model Strategy TBR TBR believes Huawei saw strong growth in all of its operating segments in 2010 Revenue Performance Revenue Drivers 2010 Est. Revenue: $28 billion, +28.3% Y/Y TBR HUAWEI REVENUE BY SEGMENT$28,000Handset $4,500$24,000Service & Revenue grew across Huaweis portfolio, reflectingRevenue in Millions$20,000$3,700 $4,900 Software strong operators demand for infrastructure, $2,400 Data services and software.$16,000$3,790$3,644$12,000$2,792$1,527$5,750 Optical Growth returned to the terminal division in 2010,$2,106$1,965 $1,265$5,094 $1,950 Fixed aided by a push into higher-value devices such as $8,000 $1,200 $3,176$2,190 $1,446$1,527smartphones. $4,000 $1,400 $8,500 Wireless $5,602$6,328$3,980$02007 200820092010 Est.SOURCE: TBR ESTIMATES AND HUAWEI 2011 Revenue and Growth Outlook 2011 is shaping up to be a good year for HuaweiTBR HUAWEI 2010 SEGMENT REVENUE GROWTHTBRand its rivals. Growth is broad-based, and demand$28,000 is being fueled by exponential rises in data trafficRevenue (in $ Millions) $800$27,000$26,000 $1,256globally.$873$25,000$423$656 $28,000 India will be a key driver of infrastructure revenue$24,000$23,000$2,172in 2011, but will pressure overall margins.$22,000$21,821 Device sales growth will accelerate in 2011 as the$21,000 distribution of low-cost Android smartphones and tablets expand to reach the mass market in developed markets.SOURCE: TBR ESTIMATES AND HUAWEI15 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 16. Financial Model Strategy TBRHuawei is investing heavily in sales and support staff and intellectualproperty to diversify and grow into other areas, such as software Expense PerformanceExpense Segments & Strategies 2010 Est. Total OPEX: $24.6 billion, +31.7% Y/YTBRTBRHUAWEI OPERATING EXPENSES$25,000 $2,800Cost of$20,000 $5,000 RevenueCost of revenue grew 27.4% from 2009, $1,953$1,511slower than revenue, as mix shifted towardIn $ Millions$15,000 $1,284$3,236 $3,538$16.8higher-margin products and services.$10,000$850 $2,350 $16,800 billion $10,890 $13,188 $1,502$5,000 $7,937 $5,424$020062007200820092010 Est.Huawei is hiring aggressively in key growth Research & DevelopmentSG&ACost of Revenue SG&A markets, particularly India, Europe and theSOURCE: TBR ESTIMATES AND HUAWEI $5 billion Middle East, to align its sales and supportTBRdepartments with the influx of business.TBR HUAWEI OPEX AS A PERCENTAGE OF REVENUE70%60%50%40%Huawei is investing heavily in TD-LTE (the30% R&Dversion of LTE that will likely be rolled out20%10%$2.8 by the big three Chinese operators) as well0% billionas applications, an area in which Huawei 20062007 2008 20092010 Est.has historically had minimal involvement. Cost of RevenueSG&AResearch & DevelopmentSOURCE: TBR ESTIMATES AND HUAWEI16 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 17. Go-to-Market & Product StrategiesTBRHuawei is innovating in all major segments, hoping to become a one-stopshop for all the needs of service providers and their end-usersTelecom Network Infrastructure Application & Software In its push to become an integral player in the applications space,Huawei launched the Any Connection MobileHuawei launched its Digital Shopping Mall (DSM) in October. TheBroadband Solution (MBB), which helps operatorsMall is a platform that aggregates and delivers apps to anyusing HSPA seamlessly migrate to LTE. Many operators Internet device. On launch, the store contained 80,000 appsworldwide are upgrading their HSPA networks to ranging from music to e-books to video. App revenue is splitHSPA+ to deliver higher speeds while waiting for the 70:30, with 70% going to the developers and 30% to the operatorLTE ecosystem to mature. The MBB solution givessupporting the mobile device. Alcatel-Lucent has similar offeringsoperators an opportunity to prepare for an eventualin this space and Huaweis entrance poses a sizable threat,move to LTE while adding capacity to their network.especially as it is compatible with all major smartphone operating systems, including Symbian, RIM and Android.Professional ServicesDevices Android is central to Huaweis smartphone and tablet strategy. iCare is a professional services solution that assists Using Googles open source OS rather than a homegrown OSservice providers in the planning, evaluation andhelps Huawei save money on software and deliver more valueoptimization of IP, optical, microwave and FTTxon the hardware portion of the device.networks. This packaged offering shows Huawei isdetermined to become more involved in services. Huawei launched its IDEOS series in September 2010. Priced between $100-$200 unsubsidized and free from some carriers Huawei has become a major player in managedsubsidized, these smartphones are affordable and appeal to aservices in India, challenging Alcatel-Lucent for thelarge demographic in not only the U.S. and Europe, but also inNo. 3 spot in provider by revenue; however, Huawei emerging markets, where smartphones are in high demand butwill not pose a major threat to Ericsson and NSN, as most models are too expensive for the general population.Indian operators tend to award their equipmentsuppliers with managed services contracts rather Huawei reported 1 million IDEOS series smartphones sold in thethan seek outside providers. first two months of launch and that IDEOS devices are available in over 70 countries.17 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 18. Alliance & Acquisition StrategiesTBRCanada will act as a launchpad for Huaweis North American ambitionsTBR Assessment of Huaweis Alliance & Acquisition Strategy Huawei is making major investments in North America as it tries to break into the United States market. With the U.S. government blocking Huaweis every move stateside, the vendor is investing heavily in Canada to prove it has no ill intentions. So far, the Canadian government has been supportive of Huaweis North American activities. In November, Huawei announced it would devote $67 million over five years to the expansion of its main North American R&D center in Ottawa. In stark contrast to the U.S. government, the province of Ontario is providing Huawei with a $6.5 million grant to put toward the expansion. To further increase its Canadian presence, Huawei partnered with two of Canadas largestHuawei makes telecommunications companies, Telus and Bell Canada. In separate deals, Huawei and the telecoms agreed to establish joint innovation centers in Canada. Huawei has had a strong relationship with bothseveral movesoperators since they gave the company its first major North American infrastructure deals in 2008.in Canada andwill retrench Huawei has clearly set itself up for a long-term push into North America. In January, Huawei opened itsfor anothernew Canadian headquarters outside of Toronto, moving its sales and marketing groups into the building and stressing a new focus on cloud computing. Cloud computing is poised to become thepush into themajor initiative behind Huaweis North American strategy.United States What the combination of these moves will do to quell the U.S. governments concerns is unclear. In the short term, there are no indications of decreased hostility on the part of the government, with officials forcing Huawei to divest the May 2010 3Leaf acquisition in March. Huawei will likely not be allowed to make significant acquisitions or win large infrastructure supply agreements in the United States this year, but establishing a foundation in Canada should prove worthwhile. With its ties to the Chinese military and limited history on the continent, government officials have rebuffed Huaweis advances. As Huawei builds its reputation in Canada and among small service providers in the United States, the U.S. government may soften its negative view of the company.18 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 19. Geographic AnalysisTBRHuaweis focus on international expansion cost it some ground in China,as Alcatel-Lucent, Ericsson and Nokia Siemens all locked up large dealsQuarterly Segment Performance2010 Growth Geo Key Deals & DriversRevenue Trends to Monitor Y/YEstimate In November, Huawei was selected to upgrade China Mobiles 10G backbone network to 40G. TBR estimates absolute capexspend by incumbent Chinese Surprisingly, Huawei was sidelined in its home telcos will continue to decline market in 2010 while Alcatel-Lucent, Ericsson andthrough 2012 as spending shifts Nokia Siemens all landed lucrative frame from network buildouts to less agreements and services contracts with leading $9.8capital-intensive services and China3.4% operators China Mobile, China Unicom and Chinabillionsoftware upgrades. Telecom. Chinese telcos will trial TD-LTE in Poor performance in China suggests Huawei was2011, but commercial overly focused on growing its share of the deployments are not expected international pie rather than maintaining its market for at least another year. share in China. Deals inked in September with Bharti Airtel, MTS India sales bottomed out in 2010. APACand Tata began to ramp up in 4Q10, but will notTBR expects India to be a key become a major contributor to revenue until 2011. $6(ex-56.5% contributor to Huaweis top-line billion China) APAC growth was fueled by deals with operators ingrowth in 2011 as 3G networks are Cambodia, Malaysia and Bangladesh. deployed across the country. TBR HUAWEI GEOGRAPHIC REVENUE FISCAL YEAR20042005 200620072008 2009 2010 Est. China73.0% 60.0%34.7% 28.0% 25.0%46.5%35.0% International27.0% 40.0%65.3% 72.0% 75.0%53.5%65.0% SOURCE: TBR ESTIMATES AND HUAWEI 19 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 20. Geographic AnalysisTBRSome European operators are becoming comfortable using Huawei as anexclusive provider of all their network needs, rather than just portionsQuarterly Segment Performance2010 Growth Geo Key Deals & DriversRevenue Trends to Monitor Y/YEstimate Canada is the driver of North American Huaweis opportunities with U.S. Tier 1revenue, while deal flow in the Unitedoperators will likely be limited to handsetsStates remains weak due to government due to regulatory barriers, but theroadblocks. vendors prospects for Tier 2 and cable North$454operator contracts are bright. Huawei still managed to win several11.3%Americamilliondeals in the U.S. in 2010 with Tier 2 & 3 TBR also expects Huaweis presence in theservice providers; its terminals aresmartphone and tablet markets to pick upincreasingly offered by the top six after the companys release of a series ofwireless operators. low-cost Android devices. Huawei landed three end-to-end 4G MEA will be challenged as uprisings acrosscontracts in 4Q10 with operators across the region cause some operators to rein inEurope, including T-Mobile in Austria,capex spending.Datame Oy in Finland and Aero2 in This revelation will hamper plans byPoland. $9.9Huawei, Ericsson and Alcatel-Lucent to EMEA52.5% These 4G deals show operators arebillionincrease involvement in the Middle East,becoming more comfortable withwhich holds much promise for bothHuawei and entrusting the vendor with network upgrades and greenfieldall aspects of deployment, rather thandeployments on the service provider andjust bits and pieces. enterprise space.Operators in Latin America areHuawei is well-positioned in CALA and$1.8aggressively bulking up capacity on their CALA has a strategic advantage thanks to its97.1% billionfixed and mobile networks to prepare forcredit lines from Chinese banks.increased broadband usage.20 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 21. Resource Management Strategy TBRHuawei is expanding its international presence to support existingoperations and capitalize on future opportunities HuaweisInvestments/R&D Focus Worldwide Operations Huaweis failure to keep 3Leaf assets upon U.S.government review reflects the companys ongoing Huawei opened its Canadian HQ in Markham,struggle to expand its presence in the United States.Ontario in January and plans to spend $67 million onHuawei had purchased 3Leaf in May 2010 for R&D in the country over the next five years. Of$2 million, including the firms virtualization andHuaweis estimated 1,500 employees in Northserver patents.America, 500 are based in Canada. Failure to win part of a Sprint supply contract led Huawei will gain leverage in the United States byHuawei to scale back its partnership with Amerilink. becoming a strong player in the neighboringBoth companies continue to work together on jointCanadian telecom equipment market. The vendorssales opportunities in the United States, but thestrategy is to use channel partners and referencesecure delivery program has been dissolved.contracts to penetrate new customer accounts.Personnel Changes TBR ANNUAL REVENUE PER EMPLOYEE Huawei ended 2010 with 110,000 employees, up$250$23015,000, or 15.8%, year-to-year. Revenue In Thousands$225 $207 Chinese headcount fell 13% in 2010 to 59,000 due to$200the relocation of employees to Europe and other$171countries across APAC, particularly India.$175$159 Huawei hired former CTO of Nortel John Roese to $150 $139lead its North American R&D team. Roese has $125worked for several well-known U.S. tech firms and is$100expected to help Huawei improve its image among2005 20062007 2008 2009regulators in North America.SOURCE: TBR AND HUAWEI21Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 22. Future Outlook TBRIndia will be a key driver of revenue growth in 2011 for most vendors as3G is deployed, but margins will be pressured due to weak pricingTBR Outlook Operators will have to adjust their business models to match the shift from a voice-centric environment to a data-centric environment. Tiered data plans will become commonplace to better monetize bandwidth, while investment in RAN modernization, backhaul, IP, HSPA+ and LTE will gain momentum as operators seek to scale capacity at a lower cost per bit and improve speeds. Though component shortages are easing, access to parts continues to be a headache for not only Industrynetwork vendors, but also handset and other device manufacturers. This challenge has created sizable backlogs for equipment suppliers and will need to be filled in 2011. Component supplies could tighten further following the disaster in Japan as the country is a major manufacturer and exporter of many critical electronic parts that go into a wide array of network infrastructure equipment and end-user electronic devices. India will be a key revenue driver in 2011, as all operators with 3G licenses had awarded rollout contracts by the end of 2010, but the weak pricing environment will pressure gross margins. Ericssons purchase of Nortels wireless assets and Nokia Siemens buyout of Motorolas wireless business have solidified both vendors stakes in North America. TBR believes the altered Competitors competitive landscape in North America will make it more difficult for marginalized players like Huawei to win business. Huawei will build a good reputation in Canada by working closely with operators, employing locally, and investing in its new R&D center in Ottawa. The hope is that good relations with the Company Canadian people will help assuage government fears about Huawei selling its products in the StrategyUnited States. Huawei is bulking up its services and applications businesses to better compete with its Western rivals and drive margin growth.22 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 23. Future Outlook TBRHuawei will likely grow faster than its industry in 2011 as its strategy togrow market share and enter higher-margin areas continues to bear fruitTBR Outlook Revenue will grow faster than the network infrastructure industry, as Huawei continues to wincontracts and take market share in developed markets like Western Europe and Canada. Gross margin will be pressured as 3G rollout activity in India ramps up, but better mix in Financialdeveloped markets should offset most of this decline. SG&A will trend higher as a percentage of revenue as Huawei builds out its sales and supportstaff in developed markets. Huawei will push its SingleRAN platform as a cost- and energy-efficient solution that can helpoperators more easily converge their 2G, 3G and, increasingly, 4G network assets. Huawei will fine-tune its TD-LTE solution and bring it to market in 2011 just in time for Chinese Go-to-Marketoperators to begin trials. Huawei will focus on winning small portions of contracts with new customers to establishrelationships and position the company for a greater share of future contracts. Huawei will focus on building out manufacturing, R&D and support facilities in India to addressIndian concerns and take advantage of the countrys relatively low labor costs. Resource Huawei will also beef up R&D facilities and sales & marketing staff in North America as the Management company prepares for rapid expansion in Canada and the United States. Localization will remain integral to Huaweis strategy of tapping new talent pools and rapidlyexpanding its international operations.23 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 24. Appendix Income Statement TBR HUAWEI TECHNOLOGIES CORPORATION Consolidated Income Statement (i n $ Thous a nds ) TBR CALENDAR YEAR2004 200520062007 200820092010 Est. FISCAL YEAR2004 200520062007 200820092010 Est. Revenue$ 3,826,687$ 5,981,542 $ 8,503,897 $ 12,840,113$ 18,070,917$ 21,820,963 $ 28,000,000 Cost of Sales1,918,5493,559,366 5,424,0117,936,73210,890,00213,188,406 16,800,000 Gross Profit 1,908,1382,422,176 3,079,8864,903,381 7,180,916 8,632,557 11,200,000 R&D487,000588,000 850,390 1,284,011 1,510,8531,952,8622,800,000 SG&A 741,3051,013,656 1,502,472 2,349,741 3,235,8713,538,1355,000,000 Total Operating Expenses 1,228,3051,601,656 2,352,862 3,577,867 4,746,7245,490,9977,800,000 Other Operating Income/Loss 17,001 30,091 106,02977,65596,692 59,728 78,025 Operating Income 696,834850,611 620,995 1,247,859 2,337,4993,081,8333,321,975 Net financing costs 1,605 38,36938,918198,881 955,810 (183,721) 323,657 Share of losses of associates16,799 12,55215,0257,27327,853 23,862 25,000 Income before income taxes678,430799,690 567,0521,041,705 1,353,8363,241,6922,973,318 Income taxes expense 45,103115,78854,664 84,807 221,238566,535535,197 Minority Interest 9,2743,079 200 -(1,010)3,0743,000 Net Income $624,053 $680,823$512,188$ 956,898 $ 1,133,608 $2,672,083 $2,435,121 PERCENTAGE OF REVENUE Revenue 100.0% 100.0%100.0%100.0%100.0% 100.0% 100.0% Cost of Revenues 50.1%59.5% 63.8% 61.8% 60.3%60.4%60.0% Gross Profit 49.9%40.5% 36.2% 38.2% 39.7%39.6%40.0% R&D12.7% 9.8% 10.0% 10.0%8.4% 8.9%10.0% SG&A 19.4%16.9% 17.7% 18.3% 17.9%16.2%17.9% Operating Income 18.2%14.2%7.3%9.7% 12.9%14.1%11.9% Net Income 16.3%11.4%6.0%7.5%6.3%12.2% 8.7% YEAR-TO-YEAR CHANGE Revenue N/A 56.3% 42.2% 51.0% 40.7%19.0% 28.3% Cost of RevenuesN/A 85.5% 52.4% 46.3% 37.2%19.4% 27.4% Gross ProfitN/A 26.9% 27.2% 59.2% 46.4%18.5% 29.7% R&D N/A 20.7% 44.6% 51.0% 17.7%27.4% 43.4% SG&AN/A 36.7% 48.2% 56.4% 37.7% 7.8% 41.3% Operating IncomeN/A 22.1%-27.0%100.9% 87.3%30.0% 7.8% Net IncomeN/A9.1%-24.8% 86.8% 18.5% 132.4%-8.9% SOURCE: TBR ESTIMATES AND HUAWEI NOTE: Huawei reports annual results only24 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 25. Appendix Balance SheetTBR HUAWEI NETWORKS Consolidated Balance Sheet TBR (i n $ Thous a nds ) CALENDAR YEAR 200520062007 2008 2009 FISCAL YEAR 200520062007 2008 2009 ASSETS Cash and cash equivalents $ 883,029 $ 1,056,042 $1,892,266 $3,033,106 $4,279,315 Trade and other receivables 2,322,711 3,650,0865,488,0777,627,7209,263,944 Investments- 64 --- Inventories 1,214,842 1,420,4552,267,2763,325,6363,652,028 Deferred tax assets 109,514 181,529 - 540,033753,477 Total Current Assets4,530,096 6,308,1769,647,619 14,526,497 17,948,763 Plant and Equipment, Net894,142 939,784931,7211,051,3481,217,538 Intangible Assets13,86210,937 15,038 18,328 80,954 Other Assets315,552 237,286502,5561,467,8461,196,750 Total Assets$ 5,753,652 $ 7,496,183 $ 11,096,934 $ 17,064,019 $ 20,444,005 LIABILITIES AND EQUITY Interest-bearing loans and borrowings $ 288,170 $ 332,883 $158,628 $1,873,665 $1,154,589 Income tax payable150,197 163,312 94,513195,549541,063 Trade and other payables2,582,120 4,183,0466,029,5058,735,208 10,249,305 Provision for warranties 39,88780,122151,201183,860172,010 Total Current Liabilities 3,060,374 4,759,3636,433,847 10,988,281 12,116,967 Interest-bearing loans and borrowings 253,17339,790215,280148,0691,242,863 Other payables 23,41225,894336,417522,427743,083 Total Liabilities 3,336,959 4,825,0476,985,544 11,658,777 14,102,913 Minority Interest in Subsidiary Companies 4,912 4,286127,5394,7629,223 Total Capital and Reserves2,411,781 2,666,8503,983,8515,400,4796,331,869 Total Liabilities and Equity$ 5,753,652 $ 7,496,183 $ 11,096,934 $ 17,064,019 $ 20,444,005 FINANCIAL RATIOS Days Sales Outstanding 154.96156.67 156.01 154.07 154.96 Turns on Inventory 2.934.12 6.966.466.25 Days Inventory Outstanding 124.58 88.6752.4156.4858.36 Fixed Asset Turnover 6.699.2713.7218.2319.23 Days Cash Outstanding 53.15 44.7153.0560.4270.60 Total Asset Turnover 4.161.28 1.381.281.16 Debt/Asset Ratio 0.580.64 0.630.680.69 Current Ratio1.481.33 1.501.321.48 Return on Assets11.8%7.7%10.3% 8.1%14.2% Return on Equity28.2% 20.2%28.8%24.2%45.6% Average Annual Revenue per Employee$ 170,901 $ 139,408 $158,520 $206,520 $229,694 Employee Count35,00061,000 81,000 87,502 95,000 CNY/USD Exchange Rate6.92926.831 SOURCE: TBR AND HUAWEI NOTE: Huawei only reports Balance Sheet annually25 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 26. Appendix Revenue Model TBRTBRHUAWEI REVENUE MODEL CALENDAR YEAR200520062007 2008 2009 2010 Est. FISCAL YEAR200520062007 2008 2009 2010 Est. IN $ THOUSANDS Reported Revenue$ 5,981,542 $8,503,897 $ 12,840,113 $ 18,070,917 $ 21,820,963 $28,000,000 Wireless$ 2,036,287 $2,636,208 $3,980,435 $5,601,984 $6,328,079 $ 8,500,000 Fixed $ 1,092,800 $1,165,034 $1,399,572 $1,445,673 $1,527,467 $ 1,950,000 Optical $ 984,242 $1,360,624 $2,189,790 $3,175,937 $5,093,848 $ 5,750,000 Data$ 605,126 $ 807,870$1,200,000 $1,264,964 $1,527,467 $ 2,400,000 Service & Software$ 687,511 $ 901,413$1,964,537 $2,791,957 $3,644,101 $ 4,900,000 Handset $ 510,348 $1,003,460 $2,105,779 $3,790,401 $3,700,000 $ 4,500,000 PERCENTAGE OF REVENUE Reported Revenue100.0%100.0% 100.0% 100.0% 100.0%100.0% Wireless 34.0%31.0%31.0%31.0%29.0% 30.4% Fixed18.3%13.7%10.9% 8.0% 7.0%7.0% Optical16.5%16.0%17.1%17.6%23.3% 20.5% Data 10.1% 9.5% 9.3% 7.0% 7.0%8.6% Service & Software 11.5%10.6%15.3%15.5%16.7% 17.5% Handset8.5% 11.8%16.4%21.0%17.0% 16.1% YEAR-TO-YEAR CHANGE Reported Revenue 56.3%42.2%51.0%40.7%20.8% 28.3% WirelessN/A 29.5%51.0%40.7%13.0% 34.3% Fixed N/A6.6%20.1% 3.3% 5.7% 27.7% Optical N/A 38.2%60.9%45.0%60.4% 12.9% DataN/A 33.5%48.5% 5.4%20.8% 57.1% Service & SoftwareN/A 31.1%117.9% 42.1%30.5% 34.5%Handset N/A96.6%109.9% 80.0%-2.4% 21.6% SOURCE: TBR ESTIMATES AND HUAWEI NOTE: Huawei reports annual results only26 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 27. Appendix Geographic Model TBRTBRHUAWEI REVENUE BY GEOGRAPHIC REGIONCALENDAR YEAR2006 2007 2008 2009 2010 Est. CALENDAR YEAR200620072008 2009 2010 Est.FISCAL YEAR2006 2007 2008 2009 2010 Est. FISCAL YEAR200620072008 2009 2010 Est.IN $ THOUSANDS PERCENTAGE OF REVENUEChinaChina34.7%28.0%25.0%46.5% 35.0%Sales$2,950,852 $3,595,232 $4,517,729 $ 10,146,748 $ 9,800,000 International65.3%72.0%75.0%53.5% 65.0%Orders $3,850,000 $4,853,563 $6,356,168 $ 10,042,746 $11,500,000 Asia Pacific (excl. China) 32.2% 29.6% 31.8%17.6% 21.5%InternationalIndia2.2%4.7% 7.2% 7.1%6.1%Sales$5,553,045 $9,244,881 $ 13,553,188 $ 11,674,215 $18,200,000 CALA 5.3%7.0% 8.5% 4.2%6.5%Asia Pacific (excl. China) $2,740,511 $3,799,383 $5,743,188 $3,842,815 $ 6,014,000 EMEA 26.7% 34.3% 33.4%29.8% 35.4%India$ 186,000$ 600,000$1,300,000 $1,560,000 $ 1,708,000 Europe 9.1%16.3% 16.5%13.7% 17.5%CALA $ 450,000$ 900,000$1,539,000 $ 923,400$ 1,820,000 MEA17.6% 17.9% 16.9%16.0% 17.9%EMEA $2,270,000 $4,399,296 $6,040,000 $6,500,000 $ 9,912,000 North America1.1%1.1% 1.3% 1.9%1.6%Europe $ 770,000$2,099,296 $2,981,000 $3,000,000 $ 4,900,000 YEAR-TO-YEAR GROWTH (REVENUE)MEA$1,500,000 $2,300,000 $3,059,000 $3,500,000 $ 5,012,000 China -17.8% 21.8% 25.7%124.6%-3.4%North America$92,533$ 146,203$ 231,000$ 408,000$ 454,000 International 132.1% 66.5% 46.6%-13.9%55.9%International Orders $7,150,000 $ 11,146,437 $ 16,943,832 $ 20,115,650 $24,500,000 Asia Pacific (excl. China)NA 38.6% 51.2%-33.1%56.5%Asia Pacific (excl. China) $2,000,000 $2,500,000 $4,650,000 $6,649,500 $ 7,500,000 India86.0%222.6% 116.7% 20.0%9.5%India$ 350,000$ 700,000$2,000,000 $2,400,000 $ 4,500,000 CALANA100.0% 71.0%-40.0%97.1%CALA $ 566,500$ 750,000$1,250,000 $1,562,500 $ 2,000,000 EMEANA 93.8% 37.3% 7.6% 52.5%EMEA $4,479,000 $7,354,316 $ 10,064,091 $ 10,404,646 $13,000,000 EuropeNA172.6% 42.0% 0.6% 63.3%North America$ 104,500$ 542,121$ 979,741$1,499,004 $ 2,000,000 MEA NA 53.3% 33.0%14.4% 43.2%Total Revenue$8,503,897 $ 12,840,113 $ 18,070,917 $ 21,820,963 $28,000,000 North America2993.7% 58.0% 58.0%76.6% 11.3%Total Orders $ 11,000,000 $ 16,000,000 $ 23,300,000 $ 30,158,396 $36,000,000 Total Revenue42.2% 51.0% 40.7%20.8% 28.3% PERCENTAGE OF ORDERS China35.0% 30.3% 27.3%33.3% 31.9% International65.0% 69.7% 72.7%66.7% 68.1% YEAR-TO-YEAR GROWTH (ORDERS) China10.3% 26.1% 31.0%58.0% 14.5% International51.7% 55.9% 52.0%18.7% 21.8% Total Orders 34.1% 45.5% 45.6%29.4% 19.4% SOURCE: TBR ESTIMATES AND HUAWEI NOTE: Huawei only reports annual financial results 27Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 28. Appendix OPEX ModelTBRTBR HUAWEI OPERATING EXPENSE MODEL CALENDAR YEAR 20052006 2007 200820092010 Est. FISCAL YEAR 20052006 2007 200820092010 Est. IN $ THOUSANDS Total Revenue $ 5,981,542 $ 8,503,897 $ 12,560,356 $ 18,328,956$ 21,500,000 $ 28,000,000 SG&A Expense$ 1,013,656 $ 1,502,472 $2,349,741 $3,235,871$3,538,135 $ 5,000,000 Sales & Marketing Expense $ 608,194 $ 901,483 $1,409,844 $1,941,523$2,122,881 $ 3,000,000 General and Administrative Expense$ 405,462 $ 600,989 $ 939,896$1,294,349$1,415,254 $ 2,000,000 R&D Expense $ 588,000 $ 850,390 $1,284,011 $1,510,853$1,952,862 $ 2,800,000 SALES AND MARKETING EXPENSE BREAKOUT Sales Expense $ 364,916 $ 540,890 $ 845,907$1,164,914$1,273,729 $ 1,800,000 Partner and Channel Spending$91,229 $ 135,223 $ 211,477$ 291,228 $ 318,432$450,000 Marketing Spending$ 152,048 $ 225,371 $ 352,461$ 485,381 $ 530,720$750,000 Advertising $91,229 $ 135,223 $ 211,477$ 291,228 $ 318,432$450,000 Total Sales and Marketing Expense $ 608,194 $ 901,483 $1,409,844 $1,941,523$2,122,881 $ 3,000,000 Total SG&A Expense16.9% 17.7% 18.7%17.7% 16.5% 17.9% Sales and Marketing Expense 10.2% 10.6% 11.2%10.6%9.9% 10.7%Sales Expense6.1%6.4% 6.7% 6.4%5.9%6.4%Partner and Channel Spending 1.5%1.6% 1.7% 1.6%1.5%1.6%Marketing Spending 2.5%2.7% 2.8% 2.6%2.5%2.7% Advertising 1.5%1.6% 1.7% 1.6%1.5%1.6%General and Administrative 6.8%7.1% 7.5% 7.1%6.6%7.1% CORPORATEWIDE HEADCOUNT R&D 16,80029,28034,830 37,62640,85050,600 Marketing, Sales and Customer Service 13,30023,18032,400 35,00138,00044,000 Supply Chain2,8004,880 8,1008,750 9,50011,000 Admin.2,1003,660 5,6706,125 6,650 4,400 Total Employees35,000 61,00081,000 87,50295,000 110,000 SOURCE: TBR ESTIMATES AND HUAWEI NOTE: Huawei only reports annual financial results28 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 29. Appendix Forecast ModelTBRTBR HUAWEI FINANCIALS AND TBR QUARTERLY PROJECTIONCALENDAR YEAR 2005 20062007 2008 20092010 Est.FISCAL YEAR 2005 20062007 2008 20092010 Est.IN $ THOUSANDSNet Sales $5,981,542 $ 8,503,897 $ 12,840,113 $ 18,070,917 $21,820,963 $28,000,000Gross Profit$2,422,176 $ 3,079,886 $4,903,381 $7,180,916 $ 8,632,557 $11,200,000SG&A$1,013,656 $ 1,502,472 $2,349,741 $3,235,871 $ 3,538,135 $ 5,000,000R&D$ 588,000 $ 850,390 $1,284,011 $1,510,853 $ 1,952,862 $ 2,800,000Operating Income $ 850,611 $ 620,995 $1,247,859 $2,337,499 $ 3,081,833 $ 3,321,975Net Income $ 680,823 $ 512,188 $ 956,898$1,133,608 $ 2,672,083 $ 2,435,121PERCENTAGE OF REVENUEGross Margin40.5% 36.2%38.2%39.7% 39.6% 40.0%SG&A16.9% 17.7%18.3%17.9% 16.2% 17.9%R&D 9.8%10.0%10.0%8.4% 8.9% 10.0%Operating Margin14.2%7.3% 9.7%12.9% 14.1% 11.9%Net Margin11.4%6.0% 7.5%6.3%12.2%8.7%YEAR-TO-YEAR GROWTHNet SalesN/A42.2%51.0%40.7% 20.8% 28.3%Gross Profit N/A27.2%59.2%46.4% 20.2% 29.7%SG&A N/A48.2%56.4%37.7%9.3% 41.3%R&DN/A44.6%51.0%17.7% 29.3% 43.4%Operating Income N/A-27.0% 100.9% 87.3% 31.8%7.8%Net Income N/A -24.8%86.8%18.5% 135.7%-8.9%SOURCE: TBR ESTIMATES AND HUAWEINOTE: Huawei only reports annual financial results29 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 30. Appendix Financial GraphsTBRFinancial GraphsTBRREVENUE GROWTH YEAR-TO-YEAR TBR GROSS MARGIN & OPERATING MARGIN 60.0%50% 51.0% 40.0% 50.0%36.2%38.2% 39.7% 39.6%40% 42.2%40.7% 40.0%28.3% 30% 30.0%19.0% 20.0%20% 12.9% 14.1% 11.9% 10.0%7.3% 9.7%10%0.0% 20062007 200820092010 Est.0% 20062007200820092010 Est.SOURCE: TBR AND HUAWEIGROSS MARGIN OPERATING MARGIN SOURCE: TBR ESTIMATES AND HUAWEITBRTBRHUAWEI PERCENTAGE OF REVENUE BY REGIONTBRHUAWEI REVENUE COMPOSITION50% 40%40%30%30%20%20%10%10% 0%0% 20062007 2008 20092010 Est. 200620072008 2009 2010 Est.China APAC (excluding China) Wireless FixedCALAEMEA OpticalDataNorth AmericaServices & SoftwareHandsetSOURCE: TBR ESTIMATES AND HUAWEISOURCE: TBR ESTIMATES AND HUAWEI30 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 31. Appendix Financial GraphsTBRFinancial Graphs TBRSELLING, GENERAL, & ADMINISTRATIVE EXPENSE TBR RESEARCH & DEVELOPMENT EXPENSE $6,00020.0%$3,00010.0% $5,00019.0%$2,5009.5% In MillionsIn Millions $4,00018.0%$2,000 $3,00017.0%9.0%$1,500 $2,00016.0%$1,0008.5% $1,00015.0%$0 14.0% $500 8.0% 2006 2007 200820092010 Est. 2006 2007 2008 20092010 Est.SG&ASG&A as % of Total Revenue R&DR&D as % of Total Revenue SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEIRETURN ON ASSETS TBRRETURN ON EQUITY TBR 16% 14.2%45.6% 11.8% 45% 12%10.3% 7.7% 8.1% 35%8% 28.2%28.8%24.2%4% 25%20.2%0% 15% 20052006 20072008 20092005 2006 2007 20082009 SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEI31 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 32. Appendix Financial Graphs TBRFinancial Graphs TBRDAYS CASH OUTSTANDING75.00 70.6060.4260.0053.1553.05 Number of Days44.7145.0030.0015.00 0.0020052006 2007 20082009 SOURCE: TBR AND HUAWEI TBR TBR DEBT/ASSET RATIOCURRENT RATIO TBR TBR0.750.68 0.69 2.000.580.64 0.630.60 1.48 1.50 1.481.501.33 1.320.451.000.300.500.150.000.002005200620072008200920052006 200720082009 SOURCE: TBR AND HUAWEI SOURCE: TBR AND HUAWEI32 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 33. Appendix Go-to-Market and Resource Management GraphsTBR Go-to-Market and Resource Management GraphsTBRTBR INVENTORY TURNSTBR TBRTOTAL ASSET TURNOVER8.006.964.504.16 6.466.256.00Number of Turns Number of Turns3.004.124.002.931.28 1.381.28 1.161.502.000.000.00200520062007 20082009 200520062007 2008 2009SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEITBRFIXED ASSET TURNSTBR DAYS SALES OUTSTANDING24.00180.00 154.96 156.67156.01 154.07 154.96 18.2319.23150.0018.00Number of DaysNumber of Turns 120.00 13.7212.00 90.00 9.27 6.69 60.00 6.0030.00 0.000.00 2005200620072008 2009 2005200620072008 2009SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEI 33Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 34. Appendix Acquisitions TBRHuawei AcquisitionsCompanyDescription Huawei purchased Options RF (radio frequency) semiconductor unit M4S for 8 million (or $11 million). Both companies had been working together to develop mobileM4Sbroadband solutions such as USB modems, embedded modules, chipsets, software andOctober 2010 services for the European market, and Huaweis decision to make the purchase highlights its aspirations to become an integral supplier to developed markets. Huawei and Option may establish an R&D center in Belgium.34 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 35. Appendix AlliancesTBR Huawei AlliancesCompanyScope of PartnershipIntertrust Huawei entered into a licensing agreement to use Intertrusts Sushi Marlin Client SDK andTechnologies Bluewhale Marlin Broadband Server. Both companies will also explore business opportunitiesMarch 2011 globally. Huawei-Symantec and Force10 Networks in long-term partnership to combine security, storageForce10 Networks and networking expertise to better address vertical markets in North America, particularlyFebruary 2011 healthcare, finance and telecom.SPIRIT DSP Huawei extended licensing agreement to use SPIRITs voice and video engines in its IMS, UC andFebruary 2011fixed mobile convergence platforms.Carrier IQ Companies entered into global software licensing agreement with Huawei integrating CarrierFebruary 2011IQs solutions into its mobile broadband data terminals. Companies are working together to develop next-generation optical transport and accessSmartworld solutions to build smart cities. Huawei will provide an end-to-end optical transport solutionJanuary 2011 and Smartworld will deploy and manage the solution for Dubai World Central (DWC) and Al- Maktoum International Airport, both in the United Arab Emirates.Qatar Telecom Jointly develop telecom solutions for key industries in Qatar and other Middle Eastern countries.January 2011 Entered Master Purchase Agreement to give Huawei access to TCS location-based services (LBS)TeleCommunication technology. TCS will let Huawei use its end-to-end Xypoint LBS solutions in its own products andSystems (TCS) services. Both companies will provide operators with professional and managed services forJanuary 2011 their LBS solutions.SequansCommunications Accelerating development and commercialization of TD-LTE technology for global market.October 201035 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 36. Appendix Alliances TBR Huawei Alliances (continued)CompanyScope of Partnership Huawei partnered with Amerilink Telecom, a startup run by former Sprint employees, to help theAmerilink Telecomvendor penetrate further into the North American market. Amerilink has also become a key U.S.August 2010distributor of Huawei equipment. Huawei hopes its partnership will better position the firm to win deals with Tier 1 operators, particularly Sprint. Huawei and IPWireless will jointly conduct interoperability testing and service provider trials for each companys Integrated Mobile Broadcast (IMB) technology. IMB technology offloads dataIPWireless traffic from 3G networks, allowing live video streaming and broadcasting and storage of content onJuly 2010 mobile devices. Huawei and IPWireless are conducting these tests to ensure mobile devices are compatible with IMB networks. Huawei and PerSay, a biometric speaker verification product supplier, have entered a partnershipPerSay that will see PerSays VocalPassword and FreeSpeech voice biometrics offerings integrated withApril 2010 Huaweis IP contact center product suite. Huawei and Opera entered a partnership whereby Huawei will preinstall the Opera Mobile 10Opera Software browser on various models of its mobile phones. Operas cross-platform user interface softwareFebruary 2010 allows operators and device manufacturers to install a mobile browser across a variety of devices.German Telecom Huawei, German Telecom and T-Mobile signed a Memorandum of Understanding to identify,T-Mobile develop and test M2M solutions. The partners will acquire pilot customers to test M2M productsJanuary 2010 and services, as well as build out distribution and business models around M2M. Huawei and Tianjin Jinke will develop and bring to market e-publishing solutions for telecomTianjin Jinke carriers. Tianjin Jinke will build terminals for its e-readers, while Huawei will provide back-officeElectronics System software to manage copyrights, billing, publishing and customs. The first e-reader will be launchedJanuary 2010 with China Mobile in early 2010.36Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 37. Appendix Recent Product AnnouncementsTBRHuawei Recent Product AnnouncementsProduct Series Configuration Configured with third-generation router architecture to support mobile and fixed WAN access asAR G3 Enterprise well as multi-service processing. Uses multi-core CPUs and non-blocking switching architecture.Access RouterHas 3M PPS processing performance and 80 Gbps switching capacity. The AR G3 supportsMarch 2011 CDMA2000/WCDMA/TD-SCDMA wireless standards as well as fixed standards including ETH, e!, XDSL, XPON (scalable to 10G PON). Integrates hybrid and pure packet microwave transmissions. Upgraded version (OptiX 900)OptiX RTN 980provides throughput of 1 Gbps per frequency carrier, while basic versions range from 400 Mbps toFebruary 20111 Gbps. Supports aggregation of microwave transmissions in 14 RF directions and is upgradable to 28 RF directions. Also supports TDM and packet cross-connections.Any ConnectionMobile Broadband Seamlessly evolves from UMTS and HSPA to LTE. Features on-demand routing modes betweenBackhaul (MBB) dynamic and static with 300 mm-depth edge routers installed in outdoor cabinets.February 2011 Professional service solution that is applicable to IP, optical transmission, microwave and FTTxiCare networks. iCare provides network planning, network evaluation and optimization for live networksFebruary 2011 as well as aids in service migration and network evolution.E398 Worlds first triple-mode modem. Supports 2G (GSM), 3G (UMTS) and LTE. The modem is initiallyDecember 2010available in select European markets.WiMAX TD-LTE Contains dual mode remote radio unit (RRU) and dual mode base band unit (BBU) to support bothSingleRANWiMAX and TD-LTE in the 2.3GHz, 2.5GHz and 3.5GHz frequency bands. Also supports MIMO andNovember 2010Beamforming technologies.Intelligent OpticalDistribution Network Lets operators locate and operate optical fibers in an FTTH environment. Supplements Huaweis(iODN) portfolio of FTTH solutions ranging from equipment to delivery and services.October 201037Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 38. Appendix Recent Product AnnouncementsTBRHuawei Recent Product Announcements (continued)Product SeriesConfigurationProvides operators with a unified service platform that aggregates Internet applications anddelivers cloud-based services to end-users. Platform supports all major smartphone operatingDigital Shopping Mallsystems, including Android, RIM and Symbian. At launch, the Mall featured 80,000 apps ranging(DSM)from music to e-books to video. The store can be accessed via nearly any Internet-enabledOctober 2010electronic device including tablets and televisions. App revenue is split 70:30, with 70% going todevelopers and 30% to telecom operators.Oceanspace S2600Oceanspace N8300Storage solution tailored to SMB. Offers unified storage platform and multi-service gateway forSecospace USG2000security and routing.BSR/HSROctober 2010Uses four twisted frequency pairs to achieve downstream speeds of 700 Mbps at a distance of 400SuperMIMO meters. Addresses crosstalk between multiple twisted pairs and increases DSL bandwidth by 75%September 2010from an average of 100 Mbps per twisted pair to 175 Mbps. Deployable to FTTB/FTTC access andprivate line applications, including base station access. End-to-end solution that includes optical distribution frames, fiber distribution terminals, fiberEasy ODNaccess terminals, optical filters, optical splitters, closures and access terminal boxesJune 2010 Solution lets operators deploy optical distribution networks with easy operation, maintenanceand administration Metropolitan OTN system accommodates data, video and storage while reducing operator costsOSN8800 T16 through energy efficiency, low maintenance and space-saving featuresJune 2010 Achieves 40G/100G transport and offers full-service cross-connection capabilities that supportODUk wavelength and packet-cross connections38 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 39. Appendix Recent Product Announcements TBR Huawei Recent Product Announcements (continued)Product Series ConfigurationiManager U2000- Pre-integration solution for network fault management developed with HPTeMIp SNMP-based iManager U2000 provides end-to-end visualized management, accurate error locating andsolution enhanced O&M efficiencyMarch 2010 This solution decreases the Operation Support System integration period for operators Triple-mode LTE modem compatible with LTE, UMTS and GSME398 Modem Based on Qualcomms MDM9200TM chipsetFebruary 2010 Allows users to switch between standardsiManager U2520 IP network assessment and optimization system that integrates IP control and IP forwarding planesFebruary 2010 Includes visualized IP service quality and visualized IP route functionsSingleRAN@Broad Mobile broadband solution that handles increased mobile data trafficSolutionFebruary 2010 Decreases per-bit cost in sites, transport and operation & maintenance 300 mm-depth IP platform with 20G/40Gbps capacityCX600-X1/X2 Metro Enables IP intelligence on metro network edge and drive convergence and improves capability andServices Platform flexibilityFebruary 2010 Enhances the IPTime broadband metro solution 1588v2-compliant DSL prototype addresses issues with GPS clock synchronizationIPTime Mobile Time synchronization accuracy to nanosecond levelBackhaul SolutionJanuary 2010 DSL with microcell and LTE base stations leverage existing copper wire from legacy networks Backhaul option for operators building out 3G and or 4G networks39 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 40. Appendix Customer DealsTBRHuawei Recent Customer DealsCompanyScope of DealMTC Building end-to-end 3G network for MTC, including the provision of RAN and packet switching. AlsoLebanon providing range of professional services.March 2011Vodafone Hutchison Huawei replacing 5,800 base stations across Eastern Australia for VHA with its SingleRAN and radio(VHA)network controllers (RNC). The new network equipment lets VHA deliver 2G, 3G and 4G service fromAustraliaa single base station at up to 42 Mbps downlink speed. VHA plans to replace an additional 2,200 baseFebruary 2011stations over the next 18 monthsEtisalatUnited Arab Deploying commercial LTE network across United Arab Emirates for Etisalat.EmiratesFebruary 2011Cell C Deployed NGBSS solution for Cell C, letting the operator generate real-time usage data of its postpaid,South Africa prepaid and hybrid services and provide its subscribers with converged billing.February 2011NII Holdings Huawei providing end-to-end UMTS network, including RAN, backhaul and core, as well as TISBrazil, Mexico services for NII Holdings Push-to-Talk service in Brazil and Mexico.February 2011Northeast WirelessNetworks Deploying Huaweis SingleRAN solutions to bring wireless coverage to rural areas in Maine andUnited StatesOregon.February 20112degrees Investing NZ $100 million (or U.S. $77 million) over the next two years to build out 2G and 3GNew Zealand network in New Zealand that is LTE-ready. Huawei providing all equipment.February 201140 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 41. Appendix Customer DealsTBR Huawei Recent Customer Deals (continued) Company Scope of Deal Telkom Telkom secured a $127 million seven-year loan from a syndicate of international banks to build out its South Africa 8ta mobile network in South Africa. Huawei is providing most of the network infrastructure. February 2011 WIND Deployed core network from Huawei to bring Wide Band AMR (also known as HD voice) services to its Canada customers across Canada. January 2011 Public Telecom (PTC) PTC, owner of Bravo, is replacing its legacy billing system with Huaweis BSS solution to improve Saudi Arabiaoperational infrastructure efficiency. January 2011 Libya Silphium Mediterranean Huawei Marine constructing and laying 440 km submarine cable connecting Libya and Greece on Sea behalf of the Libyan International Telecom Company (LITC). January 2011 Vodafone Awarded Huawei five-year managed services contract to assume operations and maintenance of Ghana Vodafones mobile, microwave, SDH and fixed switching networking in Ghana. January 2011 TeliaSonera Using Huaweis SingleRAN@Broad solution to upgrade and expand operators GSM/HSPA+/LTE Norwaynetwork across southern Norway. The solution will make TeliaSoneras HSPA+ network handle 42 January 2011Mbps with the option of a future upgrade to 84 Mbps. Kyivstar Ukraine Kyivstar building out FTTB network across Ukraine using Huaweis Ethernet switches. January 201141Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 42. Appendix Customer Deals TBRHuawei Recent Customer Deals (continued) Company Scope of Deal T-Mobile Rolling out LTE network and upgrading T-Mobiles GSM network in Austria under a five-year Austria contract. T-Mobile plans to cover one quarter of Austrias population with LTE by the end of 2013. December 2010 Government Guyana government paying Huawei $35 million to deploy a wireless network at select hospitals, Guyana police stations, military outposts and other government facilities across the country. December 2010 Millicom International Huawei deploying international long-distance (ILD) network covering Guatemala, Honduras and El Cellular (MIC) Salvador for Millicom. Central America December 2010 TTST Huawei was exclusive supplier of an end-to-end WiMAX network covering the Caribbean islands of Trinidad & Tobago Trinidad & Tobago for TSTT. December 2010 China Unicom Guangzhou Unicom, a subsidiary of China Unicom, is using Huaweis Hybrid MSTP Transport China solution to provide EDGE, HSPA+ and WLAN service during the 2010 Asian Games in Guangzhou. December 2010 SI Wireless Building out CDMA EV-DO network covering 1.2 million POPs in Illinois, Kentucky and Tennessee United States for SI Wireless. The network includes 300 cell sites and will be finished by mid-2012. November 2010 Bite Huawei upgraded all of Bites base stations to be LTE-ready as well as deployed 80 additional sites. Latvia Huawei also optimized Bites RAN to be 20% to 30% more energy-efficient. November 201042 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 43. Appendix Customer DealsTBRHuawei Recent Customer Deals (continued) Company Scope of Deal CamGSM CamGSM purchasing $500 million worth of network equipment and services from Huawei over five Cambodia years. CamGSM obtained financing via the Bank of China. November 2010 China MobileChina Mobile chose Huawei to supply and build out an 80x40G Wavelength Division Multiplexing China national backbone network. Huaweis 40G OTN solution will upgrade the wavelength capacity of November 2010 China Mobiles network from 10G to 40G. Datame Oy Huawei building end-to-end WiMAX network for Datame Oy that will cover 70% of Finlands Finland population by the end of 2013. November 2010 Aero2 Awarded frame contract to deploy worlds first TD-LTE network for Aero2 in Poland. Huawei is Poland providing an end-to-end LTE TDD/EPC solution. November 2010 Movistar Movistar replacing its CDMA equipment with Huaweis Advanced Telecom Computing Peru Architecture-based (ATCA) CDMA mobile softswitch all-IP solution. November 2010 Huawei supplying and rolling out end-to-end SingleRAN network across Bangladesh for Grameenphone Grameenphone under a three-year contract. Products supplied include SingleCORE, SingleEPC, Bangladesh ngHLR and IP Signalling Transfer Point (STP) solutions. The new infrastructure will bulk up capacity November 2010 of Grameenphones existing network so it can handle an influx of voice and data traffic. Huawei will deploy a wireless network covering 350 villages across Nigeria for MTN for $40 million MTN by the end of May 2011. MTN is planning further network expansion in late 2011 to cover an Nigeria additional 500 villages and Huawei stands a good chance of winning that contract should it do a October 2010 good job on phase one.43 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 44. Appendix Customer Deals TBRHuawei Recent Customer Deals (continued) Company Scope of Deal Telekom Brunei BerhadHuawei delivering end-to-end FTTH broadband network covering 40,000 subscribers in Brunei Bruneiwith 150 Mbps Internet service. The project has been divided into four phases. October 2010 MegaFon Using Huawei NE5000E routers to construct backbone nodes for a 40 GB IP/MPLS network in RussiaMoscow and St. Petersburg. The routers will help MegaFon optimize its existing core network by October 2010bulking up bandwidth. Vodafone Paying Huawei 1 billion (or $1.4 billion) to supply and deploy its HSPA+ SingleRAN solution to Italy 12% of Italys population (about 1800 towns). October 2010 Lattelecom LatviaHuawei supplying fiber optic access nodes and devices for end-users to Lattelecom. October 2010 du United Arab Upgraded dus HSPA+ 21 Mbps network to DC-HSPA+ 42 Mbps. Emirates September 2010 Huawei will plan, design, deploy and maintain a 3G HSPA network in three telecom circles in India Bharti Airtel for Bharti Airtel. Ericsson and Nokia Siemens also won similar contracts, with Ericsson garnering India seven circles and Nokia Siemens landing three circles. Bharti Airtel has 3G licenses for 13 telecom September 2010 circles across India. MTS MTS India outsourced the management of all 22 of its telecom circles in India to Huawei, ZTE and India Ericsson. September 201044 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 45. Appendix Customer Deals TBRHuawei Recent Customer Deals (continued)Company Scope of DealSafaricomDeployed Convergent Billing Solution (CBS) in Kenya for Safaricom. Huaweis CBS provides onlineKenyarating, real-time control, and express billing for telecom operators.September 2010Huawei launched an 1800MHz LTE/EPC network using its SingleRAN@Broad solution for Mobyland inMobylandPoland, allowing for peak downlink speeds of 146 Mbps per user. Huawei first used a softwarePolandupgrade to make Mobylands 2G network support LTE. This is the first commercial LTE/EPC networkSeptember 2010based on 1800MHz spectrum with 20MHz bandwidth on a single radio unit.Tata TeleservicesHuawei to provide SingleRAN for 3G network in five of Tatas nine telecom circles in India. NokiaIndiaSiemens won the remaining four circles.September 2010QtelHuawei will roll out FTTH for Qtel in Qatar. Huawei will replace copper connections with high-speedQatarfiber, enabling downlink speeds up to 100Mbps. The project will last for three years.August 2010Huawei is providing BT with optical access and transmission products, including Huaweis SingleFANBTsolution, to help with the deployment of BTs new national fiber network. BT boosted its investmentUnited Kingdomin broadband by 1 billion ($1.5 billion) to bring faster Internet services to two-thirds of U.K.August 2010 households by 2015. Huawei has been an integral supplier of fiber access equipment to BT since theoperators broadband deployment began in 2008.Huawei will build and manage an end-to-end turn-key FTTx High-Speed Internet network using GPONMaxis Berhadtechnology for Maxis Berhad. The duration of the managed services agreement is three years. MaxisMalaysiaBerhad plans to cover 12 million customers across Malaysia, and will particularly target enterpriseAugust 2010customers.VodafoneVodafone is offering customers in the United Kingdom a monthly Mi-Fi package using the HuaweiUnited KingdomR201 router.August 201045Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 46. Appendix Customer Deals TBR Huawei Recent Customer Deals (continued) Company Scope of Deal TelefonicaTelefonica has been using Huaweis service delivery platform (SDP) in its Latin American operations World and now plans to deploy the software globally. The SDP fits Telefonicas application development August 2010 strategy by establishing a foundation for these services to be created. Tata Teleservices Tata Teleservices installed Huaweis MSC Pool solution, boosting service and reliability for the India operators 1.5 million subscribers in the Mumbai metro area. August 2010 Huawei deployed its 40G Optical Transport Network solution for PCCW, allowing PCCW customers to experience higher bandwidth and more flexible service features. Transport capacity increases to 3.2 PCCWTerabit and bandwidth per wavelength jumps 400% with the use of technologies like 80-wavelength Hong Kong 40G, Reconfiguration Optical Add/drop Multiplexer, and optical and electrical cross-connection. August 2010 In a separate agreement also announced in August, Huawei deployed its 42Mb/s Dual Carrier HSPA+ solution, doubling the downlink peak data rate of PCCWs existing HSPA+ network covering Hong Kong. SingTel SingTel deployed Huaweis NE5000E 1+2 router cluster system in its converged IP backbone network. Singapore This router system, the industrys most energy-efficient, achieves 2.56T port capacity and is scalable to August 2010 200T. Huawei was selected by China TieTong Telecommunications, a subsidiary of China Mobile, to China TieTong exclusively provide equipment for the expansion of the operators CTTNET nationwide broadband IP China network. Huawei is supplying its Quidway NetEngine5000E core router, which achieve 2.56T port August 2010 capacity and are scalable to 200T. StarHub StarHub adopted a smartphone signaling solution from Huawei that enhances network performance Singapore by reducing smartphone signaling traffic. The solution reduces 56% of the redundant signaling loads in July 2010 StarHubs smartphone mobile data service. Vodafone selected Huawei and Ericsson to upgrade its base stations to LTE and roll out LTE-compatible Vodafone base stations across rural regions of Germany. In all, Vodafone plans to have 1,500 base stations Germany installed by 2011. Vodafone Germany is embracing wireless broadband as a less expensive alternative July 2010 to rolling out fixed line access for Internet services.46 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 47. Appendix Customer Deals TBR Huawei Recent Customer Deals (continued) Company Scope of Deal ONO selected Huawei to upgrade and run its voice network under a seven-year renewable contract. ONO Huawei will deploy softswitches, media gateways and other IMS solutions. Huawei will also provide Spain managed services for the network, taking on 40 ONO employees to help with activity monitoring, July 2010 workflow management and configuration management. Huawei will deploy HSPA+ and LTE base stations for Italian operator Wind. Wind selected Huaweis Wind SingleRAN platform because it can converge GSM, HSPA and LTE RAN onto one platform. The operator Italy will also purchase core network equipment supporting SDH and VoIP and IMS infrastructure from June 2010 Huawei to support its all-IP strategy. Suddenlink Deploying Digital Terminal Adapters (DTA) from Huawei to offer more Video on Demand, HDTV, and Communications Docsis 3.0 services. Suddenlink is an MSO with about 1.3 million customers and the DTA boxes will be United States offered to its customers across 20 markets in the southeastern United States. June 2010 VodafoneVodafone Spain is offering femtocells manufactured by Huawei to its Office customers, which include Spain 25,000 companies with over 500,000 lines across Spain. The femtocells enable Vodafones customers June 2010 to realize better voice and data access. Huawei will deploy its IPTime broadband metro solution for Brazilian cable and broadband provider NET NET. The deployment will enable high-definition video service for NET subscribers using video packet Brazil retransmission and fast channel change, which are part of Huaweis SingleMetro and Multiplay May 2010 solutions. HiBeam Internet Huawei supplied radio equipment to HiBeam to support broadband services to subscribers in the & Voice Midwest and Southeast. Speeds can now reach 3-6 mbps on average, with bursts up to 10 mbps. The United States new equipment supports migration to LTE. May 2010 Huawei and vividwireless launched Australias first commercial WiMAX network in Perth. The network vividwireless delivers wireless access speeds comparable to ADSL2+ connections using Beamforming and 4T4R Australia technology. The rollout in Perth took six months to build and Huawei will build out additional WiMAX May 2010 networks for vividwireless in 2H10.47Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 48. Appendix Customer Deals TBR Huawei Recent Customer Deals (continued) Company Scope of Deal Saudi Telecom Huawei will deploy a pre-commercial LTE network for STC covering several cities in Saudi Arabia, Company (STC) including Riyadh and Dammam. Additionally, STC will use Huawei IP microwave products, specifically Saudi Arabia the RTN900 series, in its LTE backhaul. April 2010 SaskTel SaskTel is using Huaweis SingleRAN solution to build out an HSPA+ network in Canada. Huaweis Canada solution allows smooth migration to LTE. March 2010 MobiTel MobiTel is paying Huawei $200 million to expand network coverage in Cambodia, and the deal Cambodia consists of equipment and services. March 2010 Telefonica O2 Huawei will assume control of field service and maintenance of Telefonica O2s mobile Germany communications infrastructure in Germany once it completes the network expansion. At that time, March 2010220 employees will be transferred to Huawei. As part of a contract signed with Telenor, Huawei will deploy a Mobile Backhaul Commercial Network Telenor Denmark in Denmark. In addition, Huawei will provide its Packet Transport Network mobile compliant backhaul Denmark solution. The network will comply with the new industry standard IEEE 1588v2 to enable an efficient February 2010 LTE conversion. China UnicomHuawei is expanding China Unicoms China 169 backbone network by deploying its NE5000E cluster China router system, which will provide four new backbone nodes in Chengdu, Xian, Chongqing and February 2010 Wuhan. MobileOne (M1) Huawei will provide an ATCA platform-based IMS solution for M1, so the operator can offer VoIP, Singapore IPTV, Centrex and HD video conferencing to its subscribers in Singapore. January 201048 Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 49. Appendix Customer DealsTBRHuawei Recent Customer Deals (continued) Company Scope of Deal LPTIC Huawei Marine Network was contracted by the Libya Post Telecommunication and Information Libya Company to lay 177 km of T-E submarine optical fiber cable, with 3.2 Tbit/s of capacity, connecting January 2010Tobruk and Emasaed in Libya. China Telecom Huawei deployed two CDMA2000 1x EV-DO Rev. B networks in Beijing and Guangzhou for China China Telecom. The 3G networks, which operate in the 2.1 GHz and 800 MHz dual-band frequencies, will allow January 2010China Telecom to offer its subscribers VoIP, VoD and streaming media. GlobeNet will use Huaweis OSN 6800 NG-DWDM OTN optical platform hardware to connect its cable GlobeNet landing station in New Jersey to points of presence in New York, Brazil, Venezuela, Bermuda and Florida. Americas The platform supports 10 Gbps, 40 Gbps and 100 Gbps wavelengths. Huawei will also upgrade the January 2010 software on GlobeNets existing iManager T2000 Network Management System. UGL Limited Huawei will supply UGL Limited with a GSM-R solution that will cover 1,455 km of track and 70 km of Australia rail tunnels across the Sydney metro network. UGL, a rail engineering firm, was awarded $225 million in January 2010December to design, install and manage a digital train radio system on RailCorps electric rail network. Zain Nigeria Huawei installed a blade mobile softswitch for Zain that will cover 8 million customers in Nigeria. January 2010 MTN Huawei deployed a UMTS900 platform on MTNs network in Ghana. The platform, which is based on Ghana Huaweis 3900-Series Node B, operates in the 900 MHz frequency and will operate in conjunction with January 2010MTNs GSM network. Omantel OmanOmantel will pay Huawei $26 million to expand coverage of its fixed line network in Oman. January 201049 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 50. Appendix Facilities TableTBR Huaweis Facilities Location Function Shenzhen, ChinaChinese Headquarters, East Pacific Headquarters Dusseldorf, GermanyEuropean Headquarters, Innovation Center Darmstadt, Germany Innovation & Demo Center Moscow, Russia CIS Headquarters Plano, Texas, United StatesUnited States Headquarters Markham, Ontario, Canada Canadian Headquarters Cairo, Egypt Middle East and North Africa Headquarters Sao Paulo, BrazilLatin American Headquarters Johannesburg, South Africa South African Headquarters Kuala Lumpur, Malaysia Asia Pacific Headquarters Richardson, Texas, United States LTE Laboratory Otemahci, Tokyo, Japan LTE Laboratory50Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 51. Appendix Facilities TableTBR Huaweis Facilities (continued) LocationFunction Beijing, ChinaR&D Facility, WiMAX Interoperability Testing Laboratory Shenzhen, China R&D Facility Shanghai, China R&D Facility Nanjing, ChinaR&D Facility Hangzhou, China R&D Facility Chengdu, ChinaR&D Facility Munich, Germany R&D Facility All-IP Network, Core Network, High-speed Transmission Paris, France R&D Facility Telecom Standard, GSM-R Milan, ItalyR&D Facility Microwave Stockholm, Sweden R&D Facility Bangalore, IndiaR&D Facility Software Dallas, Texas, United StatesR&D Facility ASIC Technologies and Wireless Algorithm Silicon Valley, California, United States R&D Facility Ottawa, CanadaR&D Facility Wireline, Wireless, Optical, and IP Networking Moscow, RussiaR&D Facility Wireless Algorithm, Application and Software Lagos, NigeriaR&D Facility Istanbul, TurkeyR&D Facility South AfricaR&D Facility Jakarta, IndonesiaR&D and Training Facility51Huawei 4Q10 | Network Business Quarterly2011 Technology Business Research, Inc. 52. Appendix Management TableTBRHuawei Key Management NamePosition Ren ZhengfeiChief Executive Officer Justin Chen Chief Operating Officer Matt BrossChief Technology Officer Ken HuExecutive Vice President Wan BiaoPresident of Wireless You YiyongPresident of Access Network Christian ChuaPresident of Transport Network Kevin Tao CEO of Huawei Device Ying Weimin President of LTE Product Line Yu ChengdongPresident, Huawei Europe Max YangCEO, Huawei India Charles DingPresident, Huawei North America Sean Yang President, Huawei Canada Charlie ChenSenior Vice President of Marketing and Product Management, Huawei USA John RoeseSenior Vice President and General Manager of North America R&D52 Huawei 4Q10 | Network Business Quarterly 2011 Technology Business Research, Inc. 53. 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