Kerry Stokes is the best-connected Australian businessman in China.
He’s got the Caterpillar franchise in northern China and media interests in Shanghai through his private companies, now he’s given China’s major telecoms equipment group Huawei a very important win in a Western market it and the Chinese government see as part of the country’s future.
For all the headlines, the takeover deals, bans, rejections, approvals and equity deals that Chinese companies are pushing at Australian companies, especially miners, the Huawei deal has been overlooked.
But it is very symbolic and the sort of deal that an astute, well-connected businessman such as Stokes, would make because he understands the wider importance.
Huawei is now China’s major global telecoms equipment supplier and it has started pushing into the so-called 4G mobile networks with the WiMax and LTE (Long Term Evolution) standards, which are emerging as the dominant standard for the newest form of mobile telephony (which aim to shift more data than anything else).
Stokes’ Seven Network has chosen Huawei to provide the equipment for the 150 base stations and rest of the network (the backhaul part of the network is coming from a Canadian company) to use the WiMax-based 4G network to be operated by an Unwired subsidiary called Vivid Wireless. It will cost about $50 million and be up and running by next March.
Other suppliers have been named, but Huawei is the exclusive supplier of the hardware and a non-exclusive supplier of customer premises hardware.
Seven says the new network will deliver speeds up to 10 times faster than available 3G networks: average speeds would be about 4Mbps, with peak speeds greater than 20Mbps.
The aim is to eventually move towards the simultaneous operation of WiMax and LTE.
It’s one of the earliest contracts of its type around the world and a major win for Huawei. It has other contracts for its 4G technology, but only as a group of supplier panels, not a single contract where it has the hardware to install.
Huawei’s emergence was noted in the current issue of The Economist.
By doing this Stokes has shown to the Chinese that he is able to help in ways other Australian companies, such as Rio Tinto, BHP and Telstra, can’t deliver on: the advancement of Chinese companies on the world stage in major new technologies.
It’s a pity then there’s so much doubt about Huawei’s ownership. It is supposed to be privately owned, but there are no such companies in China. Some reports suggest it is linked to the military as the founder is a former military PLA officer.
This clouded ownership was one of the reasons why the US government rejected its partnership with the Bain private capital group to buy US networking group, 3Com in late 2007 and early last year because of opposition in the US Congress.
But Kerry Stokes has delivered where the Americans couldn’t on a major deal.
The rejection in the US hasn’t stopped Huawei’s strong growth and business expansion in the US and Europe. The Vivid deal through Stokes though will give it more credibility.