Though it’s one of the biggest players in the mobile market, the name Huawei is virtually unknown to Canadian consumers.
Huawei is activating at Katy Perry concerts nationwide
For the past five years, the Chinese company has outfitted Canada’s biggest mobile providers with their wireless networks, selling them the equipment they need for towers and managing network maintenance. It currently provides Telus and Bell with about 70% of their LTE coverage and lists smaller operators like Wind Mobile and SaskTel as clients.
Now Huawei wants to wedge its way into Canada’s smartphone market. This spring the company inked a deal with Live Nation Canada to sponsor ten Katy Perry concerts, marking its first major marketing investment in Canada.
The string of concerts will be the first time consumers see the name Huawei outside the retail space; last year Bell and Telus started selling the brand’s phones with pre-paid plans, and Wind Mobile has long offered them.
With its marketing investment, the company wants to show Canada’s mobile carriers it’s creating a brand, hoping they will pair Huawei’s mid-market models with full-term contracts, according to Scott Bradley, corporate vice-president at Huawei Canada.
Bradley said the company has successfully done this in Asia and Europe and is now turning its attention to winning over providers – and consumers – in Canada, too.
A Chinese giant
In 2013, Huawei reported $39.6 billion in revenue, mostly from services provided to telecom providers across the globe. The year before that, it overtook Ericsson to become the largest telecom equipment provider on Earth.
As it stands, 75% of the company’s revenue comes from its network business, but it’s looking to grow consumers sales into a larger portion of that pie.
Iain Grant, managing director of the technology consultancy Seaboard Group, said the company’s deep pockets and experience on the business-to-business side of the mobile market make it a serious contender.
“Huawei is a company with huge resources and a certain dedication to achieve. If they put their minds to it, they have a prospect of success,” Grant said.
However, he added that in North America, Huawei is not yet a consumer company and that they have a long path of brand building before they will see real results. While sponsorship is a good start, he said the marketers and agencies the company selects to run its local marketing (it currently works with Saatchi & Saatchi and High Road Communications) will have the large impact on its success in Canada.
Betting on the middle
Huawei’s brand tagline for 2013 was “Smartphones at a Smart Price.” The company has started at the low end of the market and has worked its way up. On the low end, Huawei provides phones for consumers who are more concerned with price than features, including Android smartphones like the Huawei Y530, which sells at Bell for less than $100.
The next step for the company, Bradley said, is to lure consumers away from high-end devices like the iPhone and Samsung Galaxy, to its own pricier models, like the P product line.
“You put a $749 iPhone next to a $499 Huawei P7 – a great device, looks good, and $250 to $300 cheaper than the iPhone – and they’ll say, ‘I kind of like this device,’” he said.
Seaboard’s Grant said finding the sweet spot between a cheap phone and an expensive one is a smart strategy for Huawei. While there is competition from a number of companies, including HTC, Motorola and Microsoft, consumers looking to spend that amount don’t have the brand loyalty of Apple and Samsung die-hards.
“As they move up from the low end of the market – which is where they are at present, low functionality phones at the lowest end of the value chain – they will run into Apple and Samsung and everybody else,” Grant said.
“That’s a prudent path. Don’t take these guys head on, find a niche,” he said, noting that Huawei may find success at the mid market where BlackBerry once was.
“There are those who think spending $700 is crazy if you can get one for $200 or $300,” he said.
New regulations, new opportunities
At the end of last year, new laws came into effect in Canada that changed the maximum mobile phone contract from three years to two. Unlike other markets, consumers in Canada have long been accustomed to having their carriers spread the cost of their phones over a long term.
Already, the cost of a basic mobile plan in Canada has risen from $31 in 2013 to $36 in 2014, according to the Wall Report, a recent study commissioned by Industry Canada.
Huawei believes the change will also push up the cost of the phones themselves, allowing it to compete on price. “With the shift to two-year contracts, that will start to force more of those costs over to the consumer. It will allow for more value-priced competitors to compete on price,” Bradley said, noting that consumers are more likely to go with a cheaper option when they see the full cost of what they’re buying.
