Sunday Picks Huawei For 3G Phone Network, Financing
Sunday, one of four major mobile phone operators in Hong
Kong, picked Chinese 3G mobile phone equipment supplier
Huawei Technologies to supply equipment for its WCDMA
network, which is expected to roll out in 2005. This marks
the first 3G project win for Huawei outside of China.
The total value of the deal is HK$900 million.
For Huawei, this will mark its entry into an international
area previously dominated by major international players
such as Nortel Networks and Ericsson.
Sunday has been severely cash strapped, and Huawei, as
part of the deal, will include a HK$500 million loan to
the company. The loan will be used to pay down outstanding
debt to Sunday's existing equipment supplier, Nortel Networks.
Sunday will not provide collateral for the loan. In addition,
Huawei will help Sunday obtain a bank loan and export
credit for the remainder of the HK$900 million of the
contract.
Although Sunday became profitable this year, it did not
have enough available to build its 3G network.
Significantly, when the deal was originally announced
early in the week, no mention of financing was made. Huawei
earlier mentioned that it did not normally provide vendor
financing. This all changed later in the week, when it
came close to signing the deal.
Both sides are taking a gamble, since this will be the
first 3G WCDMA network project for Huawei outside China,
and the company is also risking some financial exposure
to land the project.
Sunday is operating in one of the most competitive mobile
phone markets in the world. Hong Kong has certain advantages
as a test market for carriers, the main one being that
the small area makes it relatively easy to install a new
network. Combined with the general sophistication of the
Hong Kong population, it gives makers an opportunity to
quickly roll out their products and services and test
them, before trying to sell in other markets. Compared
to buyers in other parts of Asia, Hong Kong users have
a reputation for being very demanding, finicky and choosy,
and willing to switch carriers for a small savings in
their monthly phone bill.
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