Expensive electricity bill helps Huawei negotiate with 5G auction winners

​The Chinese company Huawei is already negotiating with practically all operators the sale of 5G equipment for the networks that will have to provide the service in the country’s capitals by July 2022.

With the threat of banning the Brazilian market practically removed by the Jair Bolsonaro government, the biggest manufacturer of telecommunications equipment in the world now has a help: the water crisis.

As water scarcity made the price of electricity reach one of the highest levels, Huawei became an important attraction for Claro, Vivo and Tim, the main winners of the fifth generation telephony auction concluded on November 5th.

That’s because, although the price of equipment from the Chinese giant is not so much cheaper than that of competitors Ericsson and Nokia, the cost of maintenance has dropped by 40%.

People participating in the negotiations claim that, only in terms of energy savings, the final cost of the 5G operation will be 30% cheaper with Huawei than with any other supplier.

Even Tim, which among the top three in the industry has the least Huawei equipment on the network, decided to evaluate the closing of contracts.

At least three of the six newcomers are studying network projects with the Chinese company. These new operators won the auction, winning regional 5G blocks.

Algar, which is expanding its area of ​​operation to include the Midwest, is one of them. In the past, the company, which only operates in an area comprised of municipalities in the Minas triangle, Goiás and São Paulo, was the first to sign a contract with Huawei. Practically all of its network is equipped with products from the Chinese giant, which has been producing in the country for 22 years.

Now the manufacturer awaits the decision of the federal government around the criteria to be adopted in the construction of its private network.

Huawei is expected to stay out of the construction of this closed network (which will be fixed and mobile in 4G).

This project will be financed by the winners of the auction (in national 5G coverage bands) — an investment that was discounted from the price of the licenses.

The 5G auction moved BRL 47.4 billion, but the bids were BRL 7.5 billion, considering the investments linked to the licenses and which were discounted. Therefore, the auction was not fundraising.

This private government network was one of the counterparts and worked as a way out found by the Minister of Communications, Fábio Faria, to convince Bolsonaro and the ideological military wing of the government not to impose restrictions on Huawei.

This threat existed during the government of former US President Donald Trump and the current government of Joe Biden, who tried — in different ways — to convince strategically aligned countries to block Huawei.

The company was chosen as the target of a geopolitical dispute between the US and China.

Without success, the Americans’ strategy is to stimulate the growth of open 5G networks (known as Open RAN), with a large offer of solutions from Ericsson and Nokia, to neutralize the advance of Huawei, which does not invest in this type of solution.

The performance of Faria, who defended the holding of the auction this year despite the resistance of the telecoms, was fundamental to guarantee the performance of Huawei in the national market.

Despite his pressure to release the auction this year with the obligation for the service to start in July of next year, the packages for the final consumer are expected to be very expensive.

There is a lack of devices on the market and those available are around US$1,000, according to representatives of the operators who are now working on the feasibility of plans.

The installation of antennas and optical fibers, necessary for the start-up of new fifth-generation networks, will face gaps due to the lack of municipal laws for telecommunications works. Although there is a general law on antennas, national in nature, each city needs to regulate it with its own law.

A survey carried out by Conéxis, the association that represents the operators, shows that only 7 of the more than 5,500 municipalities in the country have this regulation. They are Boa Vista, Brasília, Curitiba, Fortaleza, Palmas, Porto Alegre and Porto Velho.

São Paulo, Rio de Janeiro and Belo Horizonte have projects in progress at the municipal councils.

Initially, telecoms estimated that the packages could cost up to 25% more than current high-end 4G plans. But the economic crisis, which compromises the income and purchasing power of Brazilians, should lead companies to cut costs as much as possible in order to offer more attractive prices. Only then will it be possible to kick-start 5G next year.

The commercial viability of this new technology has not yet been tested in practice and there is concern that the high price will be an impediment to the massification of the service.

Initial projections from the technical area of ​​Anatel (National Telecommunications Agency) indicate that the sale of 5G packages will only be successful in around 60 cities in the country.