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At Huawei’s pre-Mobile World Congress (MWC) analyst briefing in London in mid-February, the vendor set out its views on the difficulties and opportunities facing operators in the Middle East and Africa (MEA) region, amid a broader session on its plans for the Barcelona MWC and beyond.
Although operators in the Middle East and Africa face a number of difficulties, they are also well-placed to benefit from growing network traffic as well as from the favorable demographics in their region, said Huawei executives at the analyst briefing.
Many MEA telecoms markets are highly competitive, and in many cases operator revenue is not keeping pace with the growth in network traffic, said Zhilei Zou, President of Huawei’s Carrier Business Group. The MEA market has also been affected by the fall in oil prices, as well as by the depreciation of many African currencies against the US dollar.
There are also common operational obstacles within the region, such as a lack of available spectrum, as well as difficulties in getting sites for base stations, deploying fiber, and achieving network efficiency, said Ken Wang, President of Global Marketing and Solution Sales in Huawei’s Carrier Business Group.
However, there are also positive trends in the MEA market, according to Huawei. Zou said that data traffic is growing strongly across the region, and music and video services are developing fast in West Africa. Mobile money services are also popular in many African markets. “Operators are willing to invest, and we are very confident about the prospects [in MEA],” said Zou. “Local operators will be able to enjoy the traffic dividend and the demographic dividend.”
Huawei said it has taken a number of steps to help MEA operators to overcome their “pain points.” For example, it has set up a data-hosting center in the UAE for client operators, to help them to manage the rise in video traffic. Huawei also said it has developed systems for improving network efficiency. And the company recently decided to set up a specialist emerging-market unit that will address the specific challenges and opportunities for operators in emerging markets such as those in the MEA region.
Huawei’s comments on the MEA market came as the vendor gave industry analysts an outline of its strategy for 2017, which it will launch formally at MWC in Barcelona at the end of February. In developing its strategy, Huawei has been considering the question of whether there is still room for growth in telecoms, said Zou. The telecoms market has changed substantially over the past few years. Zou says it is broader and more complex than in the past, and yet marginal returns are declining. However, operators can overcome the difficulties that they face. And Huawei wants to move beyond its established role as a producer of “boxes” of telecoms equipment, and help operators to identify and develop new growth sectors. “When carriers grow, Huawei can grow,” said Zou.
Huawei has identified three key growth areas for the telecoms sector. Firstly, Huawei believes that video will be “the next trillion-dollar market.” Secondly, there are still big opportunities to connect people and households that are not yet connected to broadband. Thirdly, there are opportunities to digitize many industry sectors.
The strategy that Huawei will unveil at MWC will be based on those new growth areas, as well as on improving network value and efficiency for operators. According to Huawei, the growth in video will come not just from IPTV and OTT consumer services, but also from video applications in segments such as smart cities, e-education, and e-health. Operators also have an opportunity to progress from reselling third-party cloud services and move into the enterprise IT service market, which is worth $1tn. Huawei said it has made a $10bn R&D investment in technologies for the virtualization or “cloudification” of the network, which the vendor sees as a necessary precursor to the move to 5G.
To prepare for 5G, Huawei has set up the TechCity program, which is currently operating in nine cities around the world. In each location, Huawei is working with a partner operator to develop technology or services for 5G. The TechCity program began in 2016, and as progress advances towards 5G, Huawei aims to add further operators and cities. Huawei also runs an initiative called X-Lab that is focused both on 5G technology and on applications.
But the challenge for Huawei and its clients will be to turn these fairly broad points about market trends into specific and effective initiatives at an operator level. And as Huawei seeks to move from being a box seller to become a strategic adviser on services, is it going beyond its area of expertise? Arguably, developing services in the sectors in which Huawei expects to see growth will require a different set of skills from those required for making and selling telecoms network equipment.
Vendor Services Review: Huawei Technologies, TE0006-001258 (July 2016)
Africa Market Outlook, 4Q16, TE0015-000410 (October 2016)
Middle East Market Outlook, 2Q16, TE0015-000377 (April 2016)
Matthew Reed, Practice Leader, Middle East and Africa
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Europe, Middle East & Africa team - +44 (0) 207 017 7700
Asia-Pacific team - +61 (0)3 960 16700
US team - +1 646 957 8878
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