Business Today

Stock options show Huawei's commitment to India

The Chinese telecom company has for the first time decided to take its stock-option scheme, offered so far only to its Chinese employees, to India.

Sunny Sen | July 20, 2013 | Updated 19:10 IST

Leading Chinese telecom company Huawei has for the first time decided to take its stock-option scheme, offered so far only to its Chinese employees, to India. This comes at a stage when the company has for the first time made a projection, maintaining that by 2017, it will be a $70 billion company globally, growing at 10 per cent compound annual growth rate every year.
In January this year, the $35.4 billion company set up a pilot project in India called 'Time-based Unit Plan' (TUP), which is equivalent to a stock-option scheme. The shares will be held by Indian employees in Huawei Telecommunications India Pvt. Ltd, and not in the parent firm, Huawei Investment & Holding Co. Ltd.
So far all shares were held by Chinese nationals. But in India even local employees will have the option to buy shares. "Anyone who has worked for more than three years at a decision making level will be entitled to TUP," says Scott Sykes, Huawei's spokesperson. At present, 74,000 of Huawei's global employee base of 150,000, owns shares in the company.
The shareholders will receive dividend in cash equivalent every five years, calculated as per the company's performance every year over a five year cycle. An internal presentation report says: "At the end, the employee may receive a cash payment based on the increase in the unit price from the date of the grant (of the shares)."
Executives in Huawei say this is a means by which the company is trying to build a relationship with, as well as demonstrate a commitment towards, countries outside China where it does business. "We are considering what, how, when and if we can roll this out to employees in other parts of the world apart from China," says Sykes.
India just seems to be Huawei's favourite country. Till 1999, the company did not have any business in India. That year it set up its first ever R&D centre outside of China. In 2006, it started its network equipment business in India, but the country still accounts for only three per cent of Huawei's global revenue.
Most of its revenue in India comes from its network business. Only in 2011 did it bring its enterprise business of storage, cloud computing solutions and tele-presence to India. It has also newly started its retail mobile devices business, after closing down the business vertical of manufacturing mobiles for operators such as Reliance and Tata.
In coming years, Huawei expects it mobile and enterprise business to grow faster than its network business, mainly because the network business already has a much larger base. The $2 billion enterprise business will become $10 billion, and its $7.8 billion devices business will grow 2.25 times by 2017, it maintains.
The company realizes it has to be more open to its buyers and convey its global ambition to people outside China. The public relations effort can be seen in the fact that Ren Zhengfei, Huawei's founder and CEO, for the first time in 26 years since Huawei's inception, gave a media interview in May in New Zealand.
The India stock-option pilot is thus another move to build closer ties with its global employee base. As far as India is concerned, the business base is small now but Huawei doesn't want to disengage from the geography. "Even if India is not huge no one will disengage from India," says C.T. Johnson, part of the global leadership team, looking after the finance department. "Very soon India will grow."
The writer is in Shanghai on an invitation from Huawei

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