By Kenan Machado, Dow Jones Newswires
Monday 23 January 2012

Chinese company aims to benefit from rising demand for Internet data cards and smartphones.

The Indian unit of Huawei Technologies Co. expects its revenue from sales of consumer devices to increase 25% this fiscal year, helped by growing demand for products such as smartphones and equipment that help people connect to the Internet, a senior executive said.

The telecommunications equipment maker expects about $500 million from sales of consumer devices in India in the fiscal year through March, compared with about $400 million last year, Marketing Director Anand Narang told Dow Jones Newswires in a recent interview.

India is one of the top five markets for Huawei, accounting for nearly 10% of its revenue in 2011. China-based Huawei's financial year runs from January to December, while that of its Indian unit is from April-March.

In India, it gets about 40% of revenue from consumer devices, which also include television set-top boxes. Its other main divisions are the network business division for telecom carriers, which makes up 35%-40%, and the enterprise division that sells networking products to non-telecom customers.

In the consumer devices division, it gets 40% of revenue from set-top boxes, which are used to decode TV signals, and the rest equally from Internet data cards and smartphones.

Its business of selling Internet cards and smartphones to telecom companies is facing pricing pressure, Narang said in the recent interview. Huawei makes these devices for companies which sell them under their own brands.

Rising debt costs and low tariffs have forced phone companies to seek lower prices from vendors such as Huawei, Narang said. But increased volumes will help Huawei offset the price pressure, he added.

To counter the pricing pressure, the company is planning to increase the sales of its self-branded devices where margins are better, Narang said.

Huawei declined to disclose its earnings margins for India.

It expects to increase retail sales of its branded devices to 20%-30% of overall revenue in the next five fiscal years, from 1% now, Narang said.

With the Indian government making it mandatory for cable operators to digitize their signals by December 2014, Huawei is witnessing strong demand for set-top boxes, Narang said.

It sold over 5.0 million set-top boxes in the last fiscal year, he said.

Sales of smartphones year to date have doubled from 4.0 million handsets last fiscal year, Narang said. Sales of Internet cards have grown 20%-25% from the 3.0 million sold in the last financial year, he added.