Summary
1. Cost is by far the biggest reason why Clearwire is considering Huawei. 2. While customarily the supplier will discount equipment by as much as 30 percent, it would not be surprising if the markdown was significantly higher in this case. 3. At this time, establishing a beachhead in the US is of the utmost importance, and selling well below cost seems not out of the question.
Analysis
Along with the potential national security issues, Cox Communication’s experience with Huawei will be an important factor. It should not be too difficult for Clearwire to find out about the supplier’s performance at the MSO. There appears to be some mixed signals surrounding the relationship. In any event, given the risks associated with going with Huawei, a second vendor will be that much more important.
The overabundance of infrastructure required at 2.5GHz makes it imperative for Clearwire to get its network elements as cheaply as possible. One can easily expect that the other vendors bidding for the contract will not go down nearly as low on cost as Huawei. Of course, Clearwire’s financial situation also makes it vital to keep CAPEX down.
We have written about the strong possibility that Clearwire’s new CEO may want to be more conservative concerning the future plans of the company. And so it is quite possible that the amount of equipment actually purchased will wind up being far less than initial expectations.
