Meet John Key’s Chinese broadband contender
Yesterday, the prime minister raised a seemingly dramatic new possibility for the government’s $1.5 billion ultrafast broadband (UFB) initiative: China’s Huawei throwing its hat into the ring at the last moment.
On Q&A yesterday, John Key had the following exchange with host Guyon Espiner (recorded in Shanghai on Friday night).
JOHN We had a bit of a round table yesterday, equivalent to sort of what we do with the United States, where we have the US/New Zealand partnership forum, we have kicked off an idea like that here in Shanghai, and there were some very heavy hitters around the table. So some big players, both from New Zealand and from China, and they certainly have a desire to want to do things in New Zealand and increase their involvement.
GUYON Are there specific projects that have been looked at, I mean I've seen commentators talk about projects like Transmission Gully in Wellington. I mean is that a realistic thing that the Chinese might come and do something like that?
JOHN They might do, and at the end of the day from New Zealand's perspective I mean we're looking for value for money. So let's take ultrafast broadband. They've got a lot of expertise in that area, Huawei is a big player, they're bigger round the world, they've got a huge partnership in the United Kingdom for instance.
No one's saying they would be the final selected partner in New Zealand but they've certainly got the capacity if they wanted to.
Crown Fibre Holdings’ official shortlist, and most of the discussions around it, are secret. So in theory any company could be on it.
But that’s not what Huawei’s about. The Shenzen-based, privately held company is huge, and growing, with revenue of $US23 billion-plus a year.
But it’s a telecommunications equipment maker, not a company that invests in and runs networks, as the government is seeking.
Plenty of Huawei gear is already here.
Huawei hardware runs 2degrees’ mobile network, launched in August last year.
And when Vodafone started unbundling Telecom’s Auckland exchanges in 2008, it moved in Huawei switching gear (although Nokia-Siemens remains the company’s primary equipment partner).
Huawei also partners with Vodafone in the UK (which could account for the prime minister’s UK reference) but again it’s supplying gear - including, this year, Huawei-branded cellphones.
It’s theoretically possible that Huawei could be contracted by a successful UFB bidder, like Vector or CityLink, for argument’s sake, to help them lay cable or - more probably - supply some of the necessary kit to run it.
Canadian UFB contender Axia NetMedia (allied with Vodafone NZ) told NBR it would consider any of the major technology suppliers - but chief executive Art Price saw it as a purely logistical step, of little interest at this political cut-and-thrust stage of the project.
And maybe if Telecom or its Chorus division picked up some UFB business, it would consider Huawei (although that would be a surprise; Alcatel-Lucent is the company’s long-standing partner).
If Huawei does become a supplier or contractor for Telecom or Axia or any other company tendering for UFB business, then the PM is right, it could be expected to offer some keen pricing.
Put it would be a radical departure for Huawei itself to become a co-investor at any level of the UFB project.
To NBR's knowledge, Huawei has never tried to buy into a foreign telco or fibre company.
In 2008, the Chinese company did mount a $US2.2 billion bid to buy US network hardware company 3Com, but the deal was blocked by Congress, for example (HP subsequently bought 3Com in a $US2.7 billion deal wrapped up in February this year).
US lawmakers said they were worried about 3Com's security technology falling into foreign hands.