Huawei gets $600m order from Russian wireless firm

Two shoppers in Yichang, Hubei province, examine Huawei-brand mobile phones. Russia's MegaFon chose Huawei as a partner to speed mobile networks in Russia. Liu Junfeng / For China Daily

OAO MegaFon, Russia's second-largest wireless operator, agreed to buy at least $600 million of equipment from Huawei Technologies Co at a time when ties between Russian and Chinese companies are strengthening.

MegaFon chose China's largest maker of network products for a seven-year contract to speed mobile networks in several Russian territories, Chief Strategy Officer Alexander Bashmakov said in a phone interview.

The deal, including software and maintenance, is worth "dozens of billion rubles," he said.

Russian companies have boosted ties with China after the United States and European Union imposed sanctions on the country to punish it for annexing the Crimean peninsula from Ukraine.

OAO Gazprom, Russia's biggest company, signed a $400 billion deal last month to ship natural gas to China.

"Huawei is one of the technological leaders in 4G equipment," Bashmakov said. "They are leading in the number of signed contracts with operators. The Russian market is very competitive in equipment prices, unlike the US, where supplies of Chinese equipment are limited."

MegaFon based its choice of Huawei on financial and technological factors rather than politics, Bashmakov said. MegaFon, controlled by Russia's richest man, Alisher Usmanov, and partly owned by TeliaSonera AB, will use a credit line from China Development Bank to fund the purchases.

Russian President Vladimir Putin is turning eastward as the US and EU sanctions batter the Russian economy. Putin visited China last month to strengthen ties with the country, Russia's largest trading partner, after bilateral trade surged sevenfold in the past decade to about $94 billion last year.

On May 20, a unit of Usmanov's mining company Metalloinvest Holding Co announced a strategic cooperation agreement with China's Hopu Investment Management Co, saying both companies will jointly develop a copper deposit.

On May 22, billionaire Gennady Timchenko said China is prepared to finance most of Russia's largest liquefied natural gas project, Yamal LNG.

Usmanov has sold most of his Facebook Inc shares and expects to benefit from investments in China's Internet giants Alibaba Group Holding Ltd and JD.com Inc, Ivan Streshinskiy, head of the billionaire's asset-management company USM Advisors LLC, said in March.

MegaFon, based in Moscow, is continuing talks with other network providers for other regions, Bashmakov said. At least seven vendors were ready to supply equipment, he said.

The carrier previously used equipment from Huawei and Finland's Nokia Oyj to build 2G and 3G networks. Closely held Huawei's rivals also include Sweden's Ericsson AB and France's Alcatel-Lucent SA.

MegaFon has said it plans at least $5.2 billion in capital spending in 2013 through 2015.

"The era of highly priced purchases is over," Bashmakov said.

"Instead, vendors in Russia have to agree on lower margins and long-term cooperation."