WCA March 2007

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Telecom News
25 Wire & Cable ASIA – March/April 2007
3Com seeks full control
of its joint venture
with Huawei
3Com Corp, an American maker of
computer networking equipment, is
paying $882 million for an additional
49% stake in Huawei-3Com Co,
valuing the maker of routers and
network switches at $1.8 billion.
The Marlborough, Massachusetts-
based company’s shares fell on
concern that it may struggle without
the help of Huawei Technologies Co ,
its Chinese partner, after buying the
remaining stake in their venture.
As reported by Bloomberg News on
29th November 2006, the acquisition
is part of a strategy by 3Com, after
posting losses over the past five
years, to regain profitability by tapping
international markets. Huawei-3Com, a
three-year venture that sells equipment
made by 3Com, accounted for about
50% of 3Com’s sales in the fiscal first
quarter of last year.
The joint venture currently does most
of its business in North America
and Europe; its sales in China are
negligible. Closely held Huawei, China’s
biggest maker of telecommunications
equipment, last year posted a 56%
gain in sales of $6 billion, more than
13 times the revenue reported by
Huawei-3Com.
“The sale is good for Huawei because
it can now focus on its core tele-
com equipment business,” one Hong
Kong-based analyst told Bloomberg.
“Huawei-3Com is peripheral business
for Huawei.”
3Com’s bid, made first on 15 th Novem-
ber, trumped an offer by private equity
firms Bain Capital LLC and Silver Lake
Partners. They, along with Huawei,
planned to borrow about $1 billion
to buy 3Com’s stake, according to
bankers involved in the transaction.
The bidding process was part of the
original agreement in 2003 that said
either company could seek control of
the venture after three years. 3Com
chairman Eric Benhamou had said
earlier in 2006 that acquiring full control
would turn 3Com into a global player.
Without the venture, 3Com’s business
consists primarily of networking
gear for smaller companies, security
products, and corporate phone
systems. In each, it trails larger rivals
including Cisco Systems Inc and
Juniper Networks Inc, both based in
California.
The transaction is subject to the
approval of the Chinese government.
Western European
companies embrace
voice/data convergence
According to a pan-European survey of
660 medium-and-large-size enterprises
conducted by a global market research
firm, Western European companies are
embracing the convergence of voice
and data.
The results, published on 30th Novem-
ber, indicate that some 44% of respon-
dents are already at some stage in
the convergence process, while 51%
are expected to be in the convergence
process within 12 months.
IDC, a provider of market intelligence
gathered from more than 50 countries,
observed that growth of voice/
data convergence is facilitating the
potential for companies to migrate
from traditional PSTN (public switched
telephone network) PBXs (private
branch exchanges) to IP (Internet
Protocol) PBXs.
Organisations across Western Europe
continued to replace their TDM (time
division multiplexing)-based PBXs and
telephones that were installed around
2000 and earlier.
French companies reported the highest
usage of pure IP PBXs (29%), while the
Netherlands reported the lowest usage
with only 3% of companies using a
pure IP PBX.
Most enterprises reporting to IDC
use a combination of solutions to
achieve convergence of their voice
and data networks. The most frequent
reason to outsource some or all of the
convergence process was absence of
in-house expertise.
Large enterprises (1,000+ employees)
most often develop and manage the
voice/data convergence in-house.
There was an increase in the number
of enterprises undertaking the entire
convergence process in-house from
25% in 2005 to 30% in 2006.
“Voice and data convergence is a
reality,” said Julie Wall, IDC research ➣➢➣
Vodafone said to vie for Indian
mobile phone giant Hutchison Essar
Commerce Minister Kamal Nath, of India, said in New Delhi on 9th January
that the chief executive of Vodafone Group PLC planned to meet with
Indian government officials to discuss the British company’s interest in
buying a controlling stake in Hutchison Essar. The deal for a position in
the fourth-largest mobile phone operator in India could top $14 billion,
said executives involved in the negotiations.
As reported in various media, Mr Nath said Vodafone had requested the
meeting to talk about its potential bid for a 67% share in Hutchison Essar.
The stake is currently held by Hong Kong-based Hutchison Whampoa,
which is controlled by the Hong Kong billionaire Li Ka-shing. Essar owns the
rest, and has the right of first refusal in any deal.
As their operations in traditional markets stagnate, established telecoms
are actively considering fast-growing emerging markets. According to a
study by the international Gartner Group, less than 10% of the 1.1 billion
people in India have a mobile phone, compared with more than 70% in the
United States.
But new users are growing at record rates. According to the Telecom
Regulators Authority of India, in November 2006 India registered 6.79 million
new mobile subscribers. In comparison, some surveys say that in certain
areas of Europe and Asia, including the United Kingdom, Hong Kong,
and Sweden, there is already more than one mobile phone subscription for
each person.
Vodafone is not alone in its interest in Hutchison Essar, which has 18 million
customers. Orascom, another Indian telecom, and the private equity group
Blackstone, possibly in concert with Reliance Communications of India,
were mentioned among the potential suitors.