Huawei Considering IPO to Boost US Presence

Huawei Technologies, a multinational networking and telecommunications company headquartered in China, is reportedly considering listing its stock on an international exchange. The company has reached out to banks for advice about how to proceed with a initial public offering (IPO). Huawei is making the effort in hopes of increasing its transparency and therefore improving its chances of winning contracts in overseas markets such as the United States.

However, on Monday, The U.S. Government raised national security concerns. Reports like this expressed in this New York Times article, will likely impact those IPO plans. According to the article, the U.S. House Intelligence Committee, after a year-long investigation, has concluded that Huawei Technologies and ZTE Inc., "were a national security threat because of their attempts to extract sensitive information from American companies and their loyalties to the Chinese government."

U.S. regulators and lawmakers have long had a problem with Huawei's security and alleged ties with China's military. Although Huawei has disputed those allegations, U.S. operators are apprehensive about working with the company. Huawei claims that it has lost several lucrative deals with U.S. operators because of those perceptions.

For example, Huawei recently lost a deal to become the third vendor in Sprint's multi-billion-dollar Long-Term Evolution (LTE) build and network overhaul. The company says it was eliminated from the list of finalists because of government pressures. Huawei VP of external affairs Bill Plummer says that although the company was the most competitive offering in terms of technology and TCO, Samsung was granted the contract. Plummer believes that non-market forces influenced that result.

A recent report in The Wall Street Journal (WSJ) stated that Huawei was seeking advice on how and where it might be able to list and what types of disclosures it would need to provide if it proceeded with an initial public offering (IPO). By pursuing a stock listing, the company would need to open up the company's finances as well as its ownership structure. The idea is that the more Huawei looks and acts like a Western company, the more it will be treated like one. But the company is also looking at the fact that fellow Chinese vendor ZTE's listings on the Shenzhen and Hong Kong stock exchanges have not produced the results it sought.

Cyber-security concerns have also hindered Huawei's efforts to land big contracts in Australia. Last year, the Australian government barred Huawei from bidding on contracts to build the country's national broadband network because of security concerns.

The telecom industry is characterized by close carrier-vendor relationships, and Huawei may have already missed out on one of the biggest U.S. opportunities. The transition to 4G in the U.S. caused a large shakeup in vendors in the industry. Motorola and Nortel have faded from the scene while Ericsson and Cisco have become the dominant suppliers of radio and core networks.

Huawei would have liked to have been a factor in that shakeup, but those LTE contracts have already been awarded, which means those companies will be the major contenders for years to come.

Huawei is a private company, which is wholly-owned by its employees. (GR) Link.