Wireless Wars by Jonathan Pelson

Author:Jonathan Pelson
Language: eng
Format: epub
ISBN: 9781953295958
Publisher: BenBella Books
Published: 2021-07-07T00:00:00+00:00

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When the award was decided, the Chinese companies learned they were out, both Huawei and ZTE. But they wouldn’t give up. On a multibillion-dollar bid like this, vendors were known to shave prices late in the game to snatch victory from their competitors. They might throw in additional services for free or even cut the “best and final” bid by another ten or twenty million dollars.

Elfman recalls getting a last-minute call from ZTE while on vacation in Tuscany. “I was in my hotel room when I got the call,” he says. “They told me, ‘We’ll give you all the 3G gear for free. For the 4G, we’ll cut our price another eight hundred million dollars.’”

Elfman was stunned. They were already the low bidder—so low there was no way they were going to make money on the contract. Now they were offering to cut nearly a billion dollars from their bid. A billion dollars!

“I phoned my head of engineering and told him about the call,” Elfman says. “I said, ‘Next call I get, I’m going to ask them to give us seven billion dollars and we’ll agree to take their gear.’ They just didn’t realize that this wasn’t about price.” (ZTE might have accepted that offer too.)

Both Hesse and Elfman acknowledge, however, that the aggressive bidding by both Huawei and ZTE had an effect on the pricing they ultimately required from the companies that were chosen to supply the gear, Alcatel-Lucent, Ericsson, and Samsung, further reducing their margins and limiting their research budgets. By the time the award was delivered to the winners—the “winners”—their own prices had been pushed so low by the Chinese bids that it became nearly impossible to turn a profit.

Elfman never did reach a comfort level with the security questions. He asked his team what it would take to be able to look at Huawei equipment and say, “This is a security problem!” They let him know that vetting equipment in a demo lab was not a useful way to ensure it wasn’t corrupt, especially when Huawei would be giving Sprint the equipment to test.

“These guys were not idiots—there wasn’t going to be something in the test gear that would flag a problem,” he points out. The only way to have confidence in the gear supplied was to have confidence in the gear supplier.

As for Amerilink, a few weeks after they failed to land that one big customer, they closed up shop.

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