To Enrich Life Through Communication Corporate Presentation HUAWEI

To Enrich Life Through Communication Corporate Presentation HUAWEI TECHNOLOGIES

To Enrich Life Through Communication Huawei Cooperation Review Industry Transformation Huawei’s Preparation Huawei’s Value Proposition – with Telcos 2 www. huawei. com 2

Huawei Technologies To Enrich Life Through Communication An innovative and customer-oriented ICT company established in 1988 and fully owned by its staff. l Over 35, 000 staff members (over 48% engaged in R&D); more than 10% annual revenue invested in R&D. l Full product portfolio including wireless products, network products, application and software products and terminals. l A leading global supplier with products deployed in over 100 countries, including the US, the UK, France, Portugal, Russia, Brazil, Singapore and Thailand, and serving 28 of the world’s top 50 operators. l Contract sales amounted to US$8. 2 billion in 2005. over 58% of which (US$4. 8 billion) was from international markets. www. huawei. com 3

Continuous Growth To Enrich Life Through Communication l Serving 28 of the world’s top 50 operators l Strategic partner with BT, Vodafone, Telefonica, etc. Contract Sales 9 （USD 1 billion） 8. 2 8 7 5. 58 6 5 3. 83 4 3 2. 67 2 4 1 0 2002 www. huawei. com 2003 2004 2005

Financial Performance To Enrich Life Through Communication USD in millions Year ended December 31 2004 2003 2002 2001 2000 Revenue 3, 827 2, 694 2, 128 2, 290 1, 933 Net Income 624 384 108 258 345 Cash Flow From Operations 396 385 311 204 255 R&D Expenditure 487 389 355 342 180 Return on Net Assets 31% 23% 7% 20% 47% Revenue amounted to US$6, 400 million in 2005 5 Notes: All financial data listed prior to 2005 are audited by KPMG. www. huawei. com

Human Resources To Enrich Life Through Communication R&D: 48% 38% Marketing, Sales and Customer Service : 38% 6% 8% Administration: 6% Supply Chain: 8% 6 l Total staff: Over 35, 000 employees www. huawei. com

Global Presence To Enrich Life Through Communication Huawei Technologies (Headquarters) Sweden UK Netherlands Russia Poland Germany Ukraine Romania Bulgaria Portugal Spain Italy Turkey Greece Tunisia Morocco Algeria Egypt France Nigeria Kazakhstan Kyrgyzstan Uzbekistan Turkmenistan South Korea Bangladesh Pakistan Shenzhen Nepal UAE Vietnam Saudi India Thailand Philippines Arabia Cambodia Malaysia Sri Lanka Kenya Singapore Canada USA Mexico Venezuela Colombia Ecuador Indonesia Peru Brazil Zimbabwe Australia South Africa Chile Argentina l 8 regional headquarters, 85 branch offices outside China l 3 -level customer service system (HQ, regional, local) www. huawei. com 7

Management Transformation To Enrich Life Through Communication Huawei works with top management consultancies to bring world-class expertise to the company, provides customer end-to-end delivery with high quality. consulting Integrated Product Development and Integrated Supply Chain Human Resources & ESOP Financial Management consulting Quality Control Organization Transformation www. huawei. com 8

Full Audit by Key Operators To Enrich Life Through Communication Strategic Partnership Selection • • www. huawei. com Auditing Concern Areas – Management Systems – Environmental – Sourcing with Human Dignity – Project Management – Product Realisation – Policy Strategy and Planning – People – Relationship Management – Facilities – Capacity – Risk Management Qualification ( Auditing) Philosophy – Strategy and Policy – Process supporting – Process Implementation – Quality Control – Continuous Improvement – Thought Leadership Completed Auditing Overview l Motorola(2000 -2003) l BT (2003 -2005) l FT(2004) l Vodafone(2005) l O 2 (2004) l Cable and Wireless(2005) l DT(2005) 9

Global R&D To Enrich Life Through Communication Adopts asynchronous development, unifies product commercialization and speeds up response to market. l Global R&D Stockholm, Sweden －Base Station architecture and system design, Radio technology and RAN algorithms Dallas, USA －ASIC technology and CDMA algorithms Bangalore, India －Software technology/platform Moscow, Russia －Algorithms and RF Shenzhen, China －CN, service platforms Shanghai, China －RAN, terminals, ASIC chipsets Beijing, China －Packet CN, GW, Terminals Nanjing, China －BOSS, 3 G services l CMM 5 and IPD (Integrated Product Development) have been widely implemented into product development. l Four R&D divisions (Central software division and institutes in Bangalore, Shanghai and Nanjing) have been awarded CMM level 5 certification. www. huawei. com 10

R&D Based on a Shared Platform To Enrich Life Through Communication Constructing a “speed, quality and cost” advantage, through modular structure, standardization and sharing technology (CBB methodology). Uniform operation and maintenance platform IP+Optical platform Fixed access platform Wireless access platform Service control platform Intelligent network platform Terminal service platform Common software and hardware platform Uniform engineering and material development platform www. huawei. com 11

Standards and Patents To Enrich Life Through Communication Persistent investment in standards and patents to be at the forefront of future technology. l Standards u l Participated in 70 international standardization organizations including ITU, 3 GPP. Patents Domestic Patents 　　　　　 9600 pcs PCT International and Overseas Patents 1574 pcs Authorized Patents 　 　1844 p c s u 5% of international UMTS essential patents (69 patents), No. 5 of global telecom companies 　　 （Till 31 Dec. 2005） www. huawei. com 12

Huawei E 2 E Delivery Process Overview To Enrich Life Through Communication Research, standard, patent Technology roadmaps Within C 2 C framework, e 2 e delivery focuses on customer commitment to committed delivery Narrow e 2 e delivery Brand mgt MM Dev Understa Perform Portfolio Bus Segmentation Analysis nd Market Plans Align & Optimize Broad e 2 e delivery Manage & Assess Perf IPD C u s T O m e r Conc ept OR Plan Deve Qual lop ify Life Cycle Launc h issues Req mgt CRM Relationship mgt - Buz partner mgt Ad/trade show mgt - Info mgt Sales mgt req NPI - win - leadership team - drive sales exection Sales execution Solution Opportunity design mgt - point Resource allocation -Customer sat mgt -Market req - Market forecast - Offering info ISC Supply chain plan Contract signature pro mfg Partner and supplier mgmt FIN / HR / IT www. huawei. com CS logistics Engineering implement TS Spare parts mgt training C u s T O m e r 13

Global Supply Chain and Logistics System To Enrich Life Through Communication Beto -Huawei, Russia Amsterdam, Holland He. Bei, China Cairo Factory, Egypt Dubai Shenzhen Headquarter, China Brazil-Huawei, Brazil Ø Ø Ø Ø Shenzhen manufacturing and logistic center—supplies globally. Hangzhou factory manufacture data-com—low level products. Brazil factory—supplies to Latin America. Beto-Huawei—supplies to Russia and Eastern Europe. Hub in Holland—supplies to Europe. Hebei manufacturing center—supplies to northern China and Russia. Dubai logistics center—supplies to middle Asia and Africa. www. huawei. com 14

Supply Chain Processes Overview To Enrich Life Through Communication PLAN Suppliers ORDER Market Product SOURCE Source Product MAKE Make Product DELIVER Enable Source Enable Make Enable Deliver RETURN Huawei Deliver Product Customers Enable Plan Supply Chain RETURN n Customer-oriented, process-based, building partnerships and sharing information n Integrated high-efficiency and open supply chain with advanced IT tools www. huawei. com 15

Global IT System To Enrich Life Through Communication Info Securit y Infrastr ucture OA Support Video/Call Facility & Conference Service Certification Center Directory Service Message Call Service Cent er Proxy Web Sever, Common Web Sever+Apps Sever, Common Apps Sever DB Sever Common DB Sever Data Center Partners’ Network Internet www. huawei. com Exabyte/Veritus Backup System Disaster Recovery Center International Network DMZ SAN Storage System Backbone Network Local Network WAN Campus LAN, LAN 16

Industry Position To Enrich Life Through Communication l 3 G World-leading wireless network supplier, 18 commercial UMTS networks l NGN No. 1 in global Vo. IP market (Dittberner) l Intelligent Network No. 1 in global market (21. 6% of users)（Ovum） l Optical Network No. 1 in global LH+MR DWDM market (Ovum-RHK) l Access Network No. 1 in global IP DSLAM market (Infonetics) No. 1 in global MSAN market in 1 H 05 (Infonetics) l Data Communication No. 3 in worldwide service provider routers (Gartner) www. huawei. com 17

Vision and Mission To Enrich Life Through Communication VISION To enrich life through communication MISSION To focus on our customers’ challenges and needs by providing excellent communications network solutions and services in order to consistently create maximum value for customers. 18 www. huawei. com

Development Strategy To Enrich Life Through Communication l Serving our customers is the only reason Huawei exists; Customer demand is the fundamental driving force of our development. l High quality, excellent service, low operating costs, and giving top priority to meeting customer requirements to enhance their competitiveness and profitability. l Continuously performing management transformation to realize efficient process-based organization operation for ensuring high quality end-to-end delivery. l Developing with our peers in the industry as both competitors and partners to jointly create a favorable environment and share the benefits of the value chain. www. huawei. com 19

Social Responsibility To Enrich Life Through Communication Fulfilling our social responsibility as a responsible corporate citizen l A dedicated member of the United Nations Global Compact l December 2004 Tsunami: Donated 2. 42 million USD worth of telecom equipment and an additional 2. 42 million USD in cash from the company and its employees l August 1998 Flood (China): Donated US$3. 7 million worth of equipment, and US$1. 85 million in cash schools. l Education Fund: Donated US$3. 09 million to set up a fund to help needy students complete an undergraduate education. 20 www. huawei. com

To Enrich Life Through Communication Huawei Cooperation Review Industry Transformation Huawei’s Preparation Huawei’s Value Proposition – with Telcos 21 www. huawei. com 21

Business Operation Models Face Transformation To Enrich Life Through Communication How should operators and equipment suppliers adapt to a more customerfocused business operation model? Service-focused Network-focused l Network layout l Technology updates l Homogeneous services l Service quality Customer-focused Service provisioning l Converged network capability l Converged services l Service marketing l Industry chain re- l Customer increase l ARPU l structuring l Integrated information services 80 s－mid and late 90 s www. huawei. com Mid and late 90 s－ early 21 st century 22

Cross-industry Penetration and Intensifying Competition To Enrich Life Through Communication Carriers compete on a broader scale l Expanding into the IT service field to create value for business users l Expanding into content & entertainment and other fields to create value for end users Applications IT Infrastructure Mobile Fixed Voice/Data Content, Entertainment Broadband Internet www. huawei. com 23

Change of Revenue Structure To Enrich Life Through Communication Diverse contents & services and their short lifecycle makes time-to-market critical. $ Content services for consumers Voice（Including mobile） 1980 Voice operation 2002 　　　　　 www. huawei. com Transformation IT services for business users 2010 Non-voice operation 24

Value Chain Transformation To Enrich Life Through Communication Value distribution is shifting toward terminal and business service. The “carrier + equipment supplier”- focused value chain is meeting serious challenges. Value Terminal Carrier Service provider Equipment supplier Future telecom value chain distributing Forepassed telecom value chain distributing 25 www. huawei. com

To Enrich Life Through Communication Huawei Cooperation Review Industry Transformation Huawei’s Preparation Huawei’s Value Proposition – with Telcos 26 www. huawei. com 26

Customer need quickly addressed through product roadmap. To Enrich Life Through Communication Marketing organization has shifted to the frontier, which: allows customer needs to be quickly transferred into a product roadmap through CCM (customer commitment management). ensures rapid roll-out of new products and services. Analyze and validate Collect Customer Marketing Follow-up and carry out www. huawei. com Taken into product roadmap 27

Customer requirement oriented: Understand customer’s real requirements To Enrich Life Through Communication At the time of products, sales dominate; while at the time of solutions, especially non-voice service, consulting, solution + business model are the main marketing methods. The conformance of the strategy and the vision to the customers’ expectation decides their loyalty to the products. Customer requirements are the strategy and vision, which reflect the future market. Global Vendor Carrier Score 1031 Solution Marketing Capability 90 High Vision Marketing Capability Customer Expectation 70 60 Middle Vision Corporate capability and Corporate potentiality Low Visioncapability and potentiality Corporate capability and Sales capability potentiality Vendor 1 2 3 Competency among vendors www. huawei. com Vendor n Global Market China branc h following Huawei Local carrier The customer in the previously called customer requirement oriented is always local customer according to our lesson learnt in NGN. We are actually five levels behind global requirements. 28

Consultancy-style Marketing To Enrich Life Through Communication Improving wide-ranging service capabilities and supporting operators to expand to the two ends of the value chain l l l l l Service consultancy Network layout & design Network optimization & capability management l l Network aggregation Joint marketing Professional service Technology and business plans & cooperative business expansion Network layout & solution design Cooperation process integration Pre-sales cooperation solution design l Outsourcing maintenance Customer Content trusteeship & solution application Application Database or content Mobile equipment management l Maintenance of special fields and 3 -level maintenance Design management and capability management Management operation l construction, operation and maintenance Management capability 29 l l www. huawei. com Specialized management operation contract General design, construction, operation and maintenance

Experience-oriented Marketing To Enrich Life Through Communication Creating experience-based environment for end-users and establishing open lab for ISPs/ICPs to attain value from end-users. Terminal Producer SP/CP Operator Huawei in. Touch Lab Operation R&D Terminal Producer SP/CP Operator Engineering Brand Cooperation Application/content Long-distance Service Verification VCOL Terminal IOT Integration support Verification AP(1 -N) Application layout AP Deployment Long-distance Terminal application AP Experience experience Application /content experience Deployment 30 Open Lab www. huawei. com Experiencing Environment

Product-line Aggregation To Enrich Life Through Communication l l Providing total network and end-to-end solutions; enabling the advantage of future network aggregation Aggregating product lines; actively handling future network aggregation and service transformation Application and Service Core Network End-to-end Solutions IP+Optical Bearer Network Wireless/ Wireline Access Network Wireless/ Wireline Terminals www. huawei. com 31

Future Network Architecture - Simplified To Enrich Life Through Communication Key Features：Convergence, Mobile, Broadband, Content & Service 32 www. huawei. com

Future Technologies Research To Enrich Life Through Communication Establishing laboratories to research FMC, IMS, Wi. MAX, IPTV, and other innovative technologies, riding the future trend of network convergence and service transformation. Business Operation Support System GSM/UMTS/ CDMA/Wi. MAX Mobile Access Single billing, multi services and tariff package Bearer Layer l l Fixed BB Access x. DSL /FTTx/ Cable/WLAN l l Metro IP over WDM MPLS IPV 4/IPV 6 Service POP l. BRAS l. GSN Service Control l l. WSN l. MG Operator’s Organization Support Network oriented to customer oriented FMC solution www. huawei. com Personal App Platform IMS core (CSCF/HSS/… ) ICT Platform Media App Platform 33

Increasing Investment in Service Application and Terminal To Enrich Life Through Communication Providing abundant service applications and terminals to help operators expand to the two ends of the value chain. IMPS Web/WAP Surfing Streaming Specially Designed Service & Applications Get involved Mobile E-mail LBS Interactive MMS M-RBT Impression Game 34 Terminals www. huawei. com

To Enrich Life Through Communication Huawei Cooperation Review Industry Transformation Huawei’s Preparation Huawei’s Value Proposition – with Telcos 35 www. huawei. com 35

Value Proposition-- Views on Telecom Industry To Enrich Life Through Communication • “Size does matter”! – Leveraging global economies of scale – Global market expansion into high growth markets – Global sourcing • Open interfaces and standardized products • Market trends – Unpredictable customer demands - no more killer application! – IT, telecom and entertainment convergence – UMTS ubiquity! – Always more competition! • Speed to market has never been this important! – Need to address multiple market segments – Need to address markets with different cultural background 36 A quick-response vendor can reduce the business developing cost ! www. huawei. com

Value Proposition -- Telcos: Need Support From Strategic Partners To Enrich Life Through Communication -> Looking for committed partners, not box sellers “We have no clue of what our customers want. Our customers have no clue of what they want. Customers know good when they see it. ” -> Minimize risk from transformation in the telecom industry • Asia is leading the new round in the telecom industry. • Speed to market is the key. • Economies of scale is the key. -> We are selecting Companies, not Products • History track • Development trend • Potential for the Growth www. huawei. com 37

Value Proposition– Collaboration with Carriers’ R&D • Joint Annual Planning – Sharing marketing intelligence – Regular workshop for dedicated issues – Monitor and survey on-going projects To Enrich Life Through Communication • Open interfaces for executive team and development team • Co-marketing and Co-service Innovation – Create customized service – Joint development – Host a value chain and innovate new revenue – Some alpha trial and test, – Dedicated solution development – Joint standardization actions • New Business Model and Profit Model – Outsourcing – Alliance and service exchange – Overseas extension and service operation – Introduce SP/CP and service bundling www. huawei. com 38

Customized Service Development Governance Model • Operator: Requirement Market • Vendors: Technique Product To Enrich Life Through Communication Joint Planning and Operations Review Planning PMT Process Manage -ment Teams • Operations&Capacity Management • Product Management & Marketing • Operator Service BP JPOR • Operator & Vendors implement Service BP corporately Direction Issues/Actions Status TWG Technical Work Groups • Release Planning • Architecture • Testing NSQR Network & Service Quality Review Time to market, Quality of product, Network & service www. huawei. com 39

Joint Development (R&D) --Platform Strategy Supports Quick Response To Enrich Life Through Communication • Dedicated Team in PDT Platform PDT Wireless IN … AIS TEAM CMCC TEAM PDT Fixed IN BT TEAM … TELEFONICA TEAM PDT Mobile data SUNDAY TEAM … TEAM PDT OSS • Close interaction HUTCHSON TEAM … CHINATELECOM TEAM PDT for each key customer … between PDT & key customers guarantee the quick customization • Benefit from every upgrade of TDT platform -3~5 new features/services for AIS per month TDT platform … Foundation Version N+1 … • Every upgrade is to fulfill the most trendy new major capability-set Note: • Upgrade steadily for high quality of both TDT & PDT platform PDT-Product Development Team • Reusable for all PDTs to save the comprehensive cost TDT-Technology Development Team www. huawei. com 40

Current Service Realization Process (SRP) To Enrich Life Through Communication A phased process that defines how new technology, features and services are realized. – 6 Phases – 4 Major Decision Points – Concurrent operation encouraged while managing risk Concept: Defines a high level view of the service idea and associated time and cost CSD Concept SG-14 MSD ROMA Feasibility: Determines the best network implementation of the service or technology Feasibility SG-13 Service Gates (Can We Go Forward) SG-14 Start ROMA SG-13 Start Feasibility SG-12 Start Feasibility Decision SG-11 Start Definition SG-10 Start Commitment SG-9 Start Development SG-8 Start Design Implementation SG-7 Start Unit Test SG-6 Start Integration SG-5 Start Performance Verification SG-4 Start Acceptance Test SG-2 Start ORT SG-1 Start Introduction SG-0 End Introduction Decision Gates: (Should We Go Forward) D 1 Proceed with Definition D 2 Proceed with Development D 3 Proceed with CI or GA D 4 Proceed with Life Cycle www. huawei. com D 1 Feasibility Report Definition: Defines the detailed plan and requirements needed to implement the service or technology Definition D 2 SG-11 TP, FSD, OTP, SOTP, FRS, Proj Plan Development: Creates the physical realization that implements the given requirements Development SG-9 SW/HW, Test Plans Service Test: Tests the service against the test plan in simulated and live environments Service Test D 3 SG-4 SG-2 Test Results, Certification Matrix Introduction: Introduce to all geographic areas and begin Life Cycle Management/Customer Care 41 Introduction D 4 SG-1 Service/Technology Launch SG-0

Joint Go To Market ---How OR, MM, Go To Market & IPD Link Together To Enrich Life Through Communication From a cross-process perspective, the requirements management process will IPD Marketing Program link to MM and IPD processes Measure Performance Align Biz Plan Dvlp Biz Plan Go To MKT Business Plan Customer Communications Release of Products Market Requirements Technical Support Products Launch Requirement s Project Emerging Product Requirements Handoff to IPD Process Other events triggering PCRs IPD Process Life Cycle Qualify Offering Requirements Develop Charter Plan IPD Concept (Process & Tools) Requirements Management www. huawei. com Marketing Promotion PMT Project MKTG PDT Project PCR Project Legend Key Inter-project (Inter-process) Handover Points Product Level OR Roadmap Handoff to Market Managemen t Process Launch Customer Wants & Needs Opportunity Technology Segmentation Mkt Assess HW Historical Data MM Project Product Line Level MM HW Biz Strategy Conceptual Diagram 42

Joint Go To Market-Case Study To Enrich Life Through Communication BT－ Datacom SME Solutions Approved, Launch, Training, Road Show, etc. China Mobile－ PPS, etc. China Telecom－ Baby On Line, AS 8010, ICT, etc. Neuf Telecom－ Triple play/IPTV Deutsch Telecom－ SME Markets Launch Some resale partners such as 43 www. huawei. com

To Enrich Life Through Communication Enriching Life Through Communication Huawei Technologies Co. , Ltd. Add: Huawei Base, Bantian, Longgang District, Shenzhen Tel: +86 -755 -28780808 Zip Code: 518129 http: //www. huawei. com 44