Sometime in 2015 when I used to edit a technology magazine, ZTE was one our subscribers, after signing to take up 20 copies of each issue of the publication.
Now there was a month when Huawei launched a new smartphone in Kenya. In the following issue of the magazine, as would be expected, we featured Huawei in the pictorials section and also did a review of the device within the magazine’s ‘Trends’ segment.
(TOP: L-to-R- Mark Jin, Sales Director for Terminal Products, ZTE Kenya; Liu Sen, CEO, ZTE Kenya and Thomas Yang, ex-Deputy CEO in charge of Government and Enterprise, ZTE Kenya. Thomas Yang was among the two ZTE execs deported from Kenya in June 2014).
The magazine came back from the printer and being my clients, I had to deliver the copies to ZTE offices. On getting to the reception, my contact – the PR Manager – was then called to come receive the copies.
She came out, beaming with a smile with arms stretched and eager to peer through the magazine to see the content. I handed the copies to her.
Moments after going through the first pages of the publication, I saw her expression change. She then invited me to the boardroom opposite the reception area.
“We normally send copies of this magazine to China to our head office. Now with pictures and a story about Huawei, I doubt this will be possible this time. I may not even leave them at the reception because both our staff and visitors may lay their hands on the copies and read about Huawei,” she said, dejectedly.
And true to her word, I later learnt that the copies were discarded a few days after I’d delivered them.
That’s just an introduction as to how intense the competition between Huawei – a private firm founded by a former public official – and ZTE – the government corporation – is when it comes to protecting their territories and strongholds.
In 2014, prior to the incident with the magazines, ZTE hosted a workshop in Nairobi. The event, held in early April, was to discuss how technology can help in creating efficiently run governments and give ZTE an opportunity to showcase to participants – who included government officials – some of its smart government solutions.
Now ZTE had also set up booths, some of which were displaying its mobile devices to give attendees a chance to interact with the products on display.
It is at one of these display booths where a couple – a lady and gentleman – became very inquisitive, asking several questions about the devices – ranging from the features, to availability to pricing and so on. They even asked where they could get the devices if they wanted to stock them as resellers. And the people manning the booth provided most of the answers.
A month or two later, I had been invited to a meeting at Huawei offices. Just before I got through the gate, I spotted the gentleman from the ZTE workshop who was asking questions concerning the devices on display coming from Huawei offices. When I reminded him that we’re together at ZTE event, he laughed it off, saying that one needs to know what the competition is doing.
It then dawned on me that the two Chinese firms, all operating in the IT sector, and with offices opposite each other in Nairobi’s Upper Hill area – with ZTE staff sitting at Britam Centre while Huawei is based at ZEP-Re Towers – could be sending their staff to spy on each during events.
But the two incidents above pale in comparison when one considers what befell two members of ZTE Kenya’s C-suite in mid 2014.
On June 9, 2014, the government deported two top executives of ZTE Kenya under unclear circumstances.
The two – Thomas Yang (the ZTE Kenya’s deputy CEO in charge of Government and Enterprise division) and Eileen Zou (director of marketing) – had been picked up at dawn the previous Saturday, and held for over 12 hours before being deported around 10pm on Sunday.
Even though the government declined to comment on the reasons for their deportation, CID officers reportedly arrested them from their residence at Mimosa Court, off Ngong Road after which they were taken to Kenya Ports Authority’s (KPA) inland depot police post along Mombasa Road in Nairobi where they were held to await deportation. Then Interior CS Joseph ole Lenku is reported to have signed the deportation orders on Saturday at 6pm and they were taken away aboard a Qatar Airways to China.
ZTE had initially won the Kshs 17 billion tender to supply the Kenya Police with communication and surveillance equipment in 2011.
However, the rivalry between the two Chinese firms would come to the fore to scuttle ZTE’s plans as Huawei Technologies later moved to court to challenge the tender. This also led many people to believe that Huawei had a hand in the hasty deportations of the ZTE executives.
When asked to comment, Liu Sen, CEO, ZTE Kenya declined, stating that the issue was being handled by the company’s lawyers.
Many people however suspect that the deportation was related to the multi-billion shilling security tender that was later on controversially awarded to Safaricom by the government with Huawei acting as the telco’s technology partner.
The Kshs 17 billion tender was to be funded by the Chinese government on condition that only Chinese firms would be awarded the projects.
Thomas Yang (real name Yang) and his counterpart and Eileen Zou (real name Zou Lingying) were apparently assigned roles some time after arriving at the firm’s China headquarters, with Thomas Yang being sent to France in another capacity within the firm.
But the ZTE – Huawei wars are not specific to Kenya alone as the firms compete viciously in whichever market they both find themselves.
In April 2011, Huawei filed lawsuits against its biggest Chinese rival for patent infringement in Germany, France and Hungary, accusing ZTE of infringing a series of its patents related to data card and 4G/LTE technology.
It also said ZTE illegally used a Huawei-registered trademark on some of its own data card products sold in the three EU markets, causing the company to lose several million dollars.
ZTE, on the other hand, did not take this lying down. It filed its own lawsuit the following day in China, alleging in the court charges that Huawei infringed several of its important patents, including an LTE patent.
The current rivalry and cut-throat competition between the two firms has left many surprised, as the IT firms were previously known more for competing against foreign rivals like Ericsson and Nokia Siemens Network.
But there are also those who have come to view the two firms as “part of one big plot – a mercantilist plan by Beijing for national champions to squeeze Western rivals out of business,” according to a 2011 article on Week in China.
“However, for people who work at the two companies, the public feud has been a long time coming. After years of competing against foreign rivals in China, the two now clash head-on in most major overseas markets… In emerging markets like Africa, the Middle East and Latin America, competition is especially intense. Western vendors have shown less interest in those regions but the Chinese firms have gone head-to-head. Trash-talking is common,” stated the article, published just after the filing of the two suits, adding that staff of both firms often “say bad things about their rivals in front of prospective clients.”
When it comes to bad-mouthing each other, ZTE reportedly likes to portray Huawei as Beijing’s policy tool because its founder, Ren Zhengfei, formerly served as an officer in the People’s Liberation Army. Huawei, on the other hand, refers to ZTE as a freeloader.
The freeloader tag becomes applicable because Huawei believes that the only reason its cross-town rival – the two firms are both based in Shenzhen – has been awarded more contracts domestically is because it is a state-owned firm.
ZTE was founded in 1985 ZTE as Zhongxing Semiconductor Company by a team of investors affiliated to China’s Ministry of Aerospace. In March 1993, Zhongxing Semiconductor then changed its name to Zhongxing New Telecommunications Equipment Company which has since been abbreviated as ZTE.
Up untill now, ZTE derives most of its revenue from China, while rival Huawei only scraps 30% of its revenues from the home market.
This may be reason why Huawei is keen to keep its rival grounded at home – both in terms of expansion and revenue – while it plays in the international market.
Analysts also note that Huawei is more aggressive when it comes to foreign markets while “ZTE mostly adopts a follower strategy,” only appearing on the scene after Huawei has made headway and then posing as a cheaper alternative.
This attempt at price undertaking by ZTE is what led to the suits filed by Huawei in the three European countries in 2011 for example.
Huawei previously had the biggest share of the data card (a product that connects laptops to cellular networks), holding about 70% share of the European market. It enjoyed this exclusivity – and the revenues that came with it – until ZTE got wind and decided to enter the same market, forcing Huawei to reduce prices in order to stay competitive.
The price wars between ZTE and Huawei led prices of the data cards to fall from €100 to €15. This had a ripple effect in the market, prompting Option NV, a Belgian vendor of wireless modems, to take both ZTE and Huawei to court in February of 2011, claiming that they were dumping wireless modems at “unfair prices” into Europe.
Even though the EU consumers may have benefited from the ZTE – Huawei price war in terms of overall cheaper cost of PCs, it will be long before the Kenyan public benefits from this rivalry.