Nothing seems to be going right these days for Chinese telecoms equipment superstars Huawei and ZTE (HKEx: 763; Shenzhen: 000063), whose new convictions for corruption in Algeria certainly won’t help their bids for greater acceptance from western governments suspicious about their ties to Beijing and broader business practices. Media are reporting that 2 employees, one each from Huawei and ZTE, have both been found guilty of corruption in a trial in Algeria and were sentenced to 10 years in prison. (English article) The pair were both also fined the equivalent of $65,000 for their involvement in a bribery scandal as they sought to gain advantage in selling networking equipment to the country’s main telco, Algerie Telecom. The 2 were tried in absentia, which indicates they conveniently got to leave the country before the charges were filed and won’t have to spend any time in an Algerian prison, avoiding any diplomatic blow-ups between Beijing and the North African country. But from an image perspective, this kind of conviction is the last thing that either Huawei or ZTE needs as both try for greater access to lucrative western markets that they have been largely shut out of for the last 2 years for a range of reasons. One of the biggest of concerns has been security, with the US particularly worried about potential ties between the 2 companies and Beijing, which could allow Beijing to use their equipment for spying. Those concerns have killed a number of high-profile bids for both companies in the last year, including Australia’s banning of Huawei in March from bidding to help build a new high-speed broadband network in that country (previous post); and ZTE’s exclusion last year from helping US wireless carrier Sprint (NYSE: S) to build its 4G network. (previous post) The Europe Union has also raised its own concerns even more recently, with media reporting last month that the EU had launched an investigation against both Huawei and ZTE over allegations that both receive unfair support from Beijing through low-cost loans, export rebates and other government incentives to boost the companies’ overseas sales. (previous post) The developments have taken their toll on both Huawei and ZTE, which have both seen their growth slow sharply over the last year as each faced obstacles in not only the west, but also in India, one of their other major growth markets, where a domestic corruption scandal has brought spending on new wireless networks to a virtual halt. All those woes and the resulting slowdown helped to fuel a recent string of domestic media reports that Huawei was making major “adjustments” to its workforce after years of breakneck growth. Huawei later denied any rumors of large-scale layoffs, even though it didn’t rule out such moves in the future. (previous post) This latest corruption conviction is unrelated to the earlier concerns over security and unfair competition, and I would suspect that Huawei and ZTE aren’t the only companies guilty of this kind of behavior in developing markets. In fact, French-American rival Alcatel Lucent (Paris: ALUA) was caught up in similar bribery allegations in China several years ago, and executives at major western firms often complain privately that rules by their home governments forbidding them from engaging in bribery and other gift buying often put them at a competitive disadvantage when doing business in emerging markets where such practices are common. Still, these latest convictions won’t do much to help recent campaigns by both Huawei and ZTE designed to show western business and government leaders that they behave like their big US and European rivals. Accordingly, I wouldn’t be at all surprised to see US and European politicians add corruption to their growing list of concerns about these 2 companies, meaning it could be even longer before they manage to make their next big deals in major western markets.
Bottom line: New corruption convictions against Huawei and ZTE employees in Algeria mark the latest setback in their campaigns to clean up their image in western markets.
Related postings 相关文章:
◙ Huawei Layoff Reports: Growth Days Over? 华为裁员消息：增长时代终结？
It’s been hard for me to differentiate between China’s top 3 US-listed hotel companies due to their similar focus, but I have to admit I’m intrigued by a new announcement from one of the three, 7 Days (NYSE: SVN), about its latest strategic decision to focus on the management business. In fact, 7 Days’ announcement shouldn’t come as a huge surprise to any industry people, as it’s largely following a trend that happened in the west a couple of decades ago and paved the way for the rise of global hotel giants like Marriott (NYSE: MAR), InterContinental (London: IHG) and Accor (Paris: AC). What all the foreign companies discovered was that it was much more profitable to simply manage hotels for other property owners rather than own the actual properties, as such a business model required much less capital investment and thus was much easier to expand. In addition, the model also offered much better profit margins than the traditional model of owning properties, allowing the big western names to not only expand more rapidly but also boost their margins in the process. Now 7 Days is very publicly telling the world that it intends to also focus on this business model that emphasizes management over ownership, as it seeks to differentiate itself from US-listed rivals Home Inns (Nasdaq: HMIN) and China Lodging (Nasdaq: HTHT), as well as Hong Kong listed rival Jin Jiang (HKEx: 2006). (
Global drug makers like Merck (NYSE: MRK) and Bristol-Myers (NYSE: BMY) have been piling into China’s drug market over the last few years in a bid to take advantage of huge new opportunities presented by the nation’s ongoing health care reform, even as growing signs emerge that risks also exist alongside the potential to make money. The latest of those risks was recently on display in the nation’s patent office, where an intellectual property law was modified to make it easier for Chinese companies to make generic versions of drugs that otherwise would still receive patent protection. (
The crowded field of couriers that deliver millions of packages each year from China’s booming e-tailers to online buyers is gearing up for a much needed consolidation, which will improve both safety and reliability for a key link in the process of moving merchandise from online stores to consumers. Recent months have seen a steady stream of reports on a wide range of problems with the courier sector, which has grown at a breakneck pace to service an e-commerce industry that generated 588 billion yuan ($92.23 billion) in sales last year, with the number expected to grow another 30 percent in 2012, according to the Commerce Ministry. Most of the sector’s current problems center on reliability, with cutthroat competition and little government oversight meaning that many smaller companies are tottering on the brink of bankruptcy as they struggle to efficiently deliver thousands of packages. Safety is also a concern, as many smaller couriers lack the resources to properly police the products they deliver. Facing this unruly market with the potential to undermine consumer confidence, many of the country’s top e-commerce firms have moved to forge their own delivery networks. Leading e-commerce companies Alibaba and Jingdong Mall, also called 360Buy, have both taken recent steps to build up their own courier services and ensure the reliability of third-party couriers they use. In one of the newest steps in that direction, reports emerged last week that Suning.com (Shenzhen: 002024), the website of one of China’s top electronics retailers, would launch a plan to make products purchased on its website available for pick-up at any of Suning’s 1,800 real-world shops throughout China. (
The Eurozone debt crisis is starting to offer some interesting M&A opportunities for cash-rich Chinese firms, as reflected by the decision by leading Spanish telco Telefonica (Madrid: TELF) to sell half of its stake in China Unicom (HKEx: 762; NYSE: CHU) to raise desperately needed cash. (
There are a couple of interesting stories from the retail space today, one involving a shrewd new move by Suning (Shenzhen: 002024) to leverage its real-world stores in the e-commerce space, and the other involving a baby step into China by US department store giant Macy’s (NYSE: M) that looks like too little too late. Let’s look first at Suning, as that’s the most exciting news and a move that could quickly give this company an advantage over more established rivals like Alibaba and Jingdong Mall in the fast-growing e-commerce space. According to media reports, Suning, best known for its chain of 1,800 home electronics shops, plans to use that real-world store network to give consumers an easy option for quickly picking up the products they purchase online. (
After several years of keeping an extremely low profile, Alibaba founder and chief Jack Ma is suddenly coming back out into the open with some major interviews as the e-commerce giant gets set to embark on what could well become one of the longest roadshows for a China Internet IPO. In all fairness, an IPO may not be the only thing on Ma’s mind right now, following his company’s recent deal to purchase about half of the 40 percent of itself owned by Yahoo (Nasdaq: YHOO). Ma and Alibaba have made it known for a while that they intend to sell most or all of that reacquired stake to new investors, and various reports have appeared over the last month stating interest was coming from various investors, including sovereign wealth funds Temasek of Singapore and China’s own China Investment Corp, also known as CIC. In a strong break with the past few years, Ma himself has granted at least 2 new interviews to major media, with both Bloomberg and the Wall Street Journal featuring stories quoting the founder of China’s largest e-commerce company. (
After witnessing a steady stream of puzzling moves into the smartphone space by Internet companies in recent months, I’m happy to say I’m finally seeing 2 new moves that I like by sector leaders Baidu (Nasdaq: BIDU) and Sina (Nasdaq: SINA). The rush into smartphones has seen many major Internet firms launch their own new products in the last 12 months, from Internet giant Tencent (HKEx: 700) to e-commerce giant Alibaba, security software specialist Qihoo 360 (NYSE: QIHU) and game operator Shanda. Clearly these companies are trying to grab a share of the fast-growing mobile Internet market, which could easily overtake traditional desktop web surfing in just a few years with the explosion of 3G services and smartphones. But rather than partner with strong players using existing mobile platforms, many of these new initiatives are pairing with less experienced cellphone makers like home electronics giants Haier and Changhong, meaning their chances of success are very limited. That’s why I like these 2 new deals with Baidu and Sina, which will see each company partner with a strong smartphone player in a very targeted way rather than trying to develop completely new models. In Baidu’s case, China’s leading search engine is reportedly close to a deal that will see its mobile search engines pre-installed on Apple’s (Nasdaq: AAPL) wildly popular iPhones sold in China. (
