Contents 01 Unique Values 02 Five-Year Summary 03 2008 Highlights 05 Message from Huawei EMT 07 Continuous Customer-Centric Innovation 09 Broadband Everywhere 11 Convergence and Transformation 13 Innovative Services 15 Emerging Markets 17 Green Communications 19 Products, Solutions and Services 20 Radio Access Network 20 All-IP Broadband Network 21 Core Network 21 Software 22 Services 22 Terminals 23 Corporate Social Responsibility 25 Financial Report 30 Glossary Unique Values Long-Term Partnership Huawei serves 36 of the top 50 global telecom operators with leading- edge products, services and solutions. We have forged strategic partnerships with leading operators in developed markets, like Europe, Japan and North America, as well as with operators in emerging markets. Huawei has maintained its record of steady growth and is recognized as one of the industry leaders today. Our solid financial conditions have laid the foundation for Huawei's consolidated partnership with operators, ensuring long-term value for customers. Continuous Innovation Based on Customer Needs In order to meet the needs of our customers, we focus on a strategy of continuous customer-centric innovation. The goal of our product R&D is to deliver timely solutions to projected and actual customer needs by developing innovations in technologies, products, solutions and services. In the past year, we further deepened cooperation with leading operators around the world, including such customers as Vodafone, China Mobile, Telefónica, Deutsche Telekom and Telecom Italia. Our R&D staff work jointly with customers to develop solutions to their specific market challenges, translating technological advantages into commercial success. Leading Products and Solutions Our products and services embrace radio access networks, All-IP broadband, core network, software, professional services and terminals. With all major products ranking among the top three in their category, we are able to serve customers with complete and competitive telecom solutions. In 2008, we established our leadership in LTE/SAE, SingleRAN, and 40G/100G transmission technologies through application of constant innovations. These technological breakthroughs will help customers create long-term competitive advantages. Customer-Centric Operational Excellence Huawei has long been implementing world-class Integrated Product Development (IPD) and Integrated Supply Chain (ISC) programs. In 2008, we continued to optimize our business processes to ensure that Huawei fulfils its commitment to meeting customer demands and maximizing customer value. We also continued to decentralize our organization to place essential decision-making in the regions. In this way the people closest to our customers are able to mobilize resources to quickly and effectively respond to our customers' needs. 01 UNIQUE VALUES Five-Year Summary USD in millions Years ended 31 December 2008 2007* 2006 2005 2004 Revenue 18,329 12,840 8,504 5,982 3,827 Net Income 1,151 957 512 681 624 Cash Flows From Operations 946 1,044 743 708 396 Operating Profit Margin 13% 10% 7% 14% 18% Return on Net Assets 24% 28% 20% 30% 31% CAGR:48% CAGR:17% 1,044 20000 1200 1000 946 18,329 1,151 1100 18000 900 1000 957 16000 800 743 900 708 14000 700 12,840 800 12000 600 700 681 624 10000 600 500 8,504 512 500 8000 400 396 5,982 400 6000 300 300 4000 3,827 200 200 2000 100 100 0 0 0 Revenue Net Income Cash Flows from Operations (USD in millions) (USD in millions) (USD in millions) ·All the financial data are quoted from the unqualified auditing reports by KPMG which are presented in accordance with IFRSs (International Financial Reporting Standards). ·The consolidated financial statements of the year ended 31 December 2008 have been translated to US dollars at the rate of USD1.00=CNY 6.8225 ( 2007: USD1.00=CNY 7.3046). ·According to the company's decision , the terminal business had been transferred into the company in 2008 , and it was excluded in 2007, so comparative figures in 2007 have been restated in accordance with IFRSs (International Financial Reporting Standards). FIVE-YEAR SUMMARY 02 2008 Highlights 03 2008 HIGHLIGHTS Leadership in the mobile market Huawei ranked No.3 in the global mobile equipment market in 2008. (Source: Informa) Industry's first LTE/SAE commercial network TeliaSonera chose Huawei to deploy the world's first LTE/SAE commercial network in Oslo, Norway, bringing users the unique advantages of mobile broadband services. First LTE-ready UMTS/HSPA Network in North America Telus and Bell chose Huawei to build an LTE-ready UMTS/HSPA network in Canada, the first UMTS/HSPA network in North America. Industry leader in All-IP mobile core networks By the end of 2008, 1.2 billion licenses of Huawei All-IP mobile softswitch had been shipped, assisting operators in constructing more open, flexible and cost efficient mobile networks. The world's longest 40G DWDM network completed The 40G DWDM network Huawei constructed for TransTeleCom connects Moscow and St. Petersburg, spanning some 1,140 KM, substantially reducing the cost per Bit. The world's first 10Tbps cluster system Huawei released its NetEngine 5000E Core Router Multi-chassis Cluster System, the industry's first Carrier-Grade 10 Tbps router, providing operators with a key enabler in delivering All-IP broadband. Leading GPON supplier in the world Huawei provides FTTx solutions to more than 50 operators around the world. In 2008, we released the industry's first 10G GPON and 10G EPON prototypes, enabling operators to deliver a broader range of high-quality ultra-broadband services to users. Rapid growth in professional services Huawei has long been committed to providing responsive, professional and dedicated services for customers. In 2008, our sales in managed services increased 67% year on year. By the end of 2008, we had been delivering more than 45 managed services projects. Leading provider of mobile broadband terminals More than 25 million units of Huawei mobile broadband terminals were shipped in 2008, making Huawei the No.1 provider of these terminals in the world. Member of the GeSI (Global e-Sustainability Initiative) As a member of the GeSi, Huawei joins other industry members to further sustainable development, promoting energy savings and reduced emissions of the ICT industry. No. 1 global PCT international patent applicant In 2008, Huawei submitted the most applications under the PCT (Patent Cooperation Treaty), filing 1,737 applications. (Source: WIPO) 2008 HIGHLIGHTS 04 Message from Huawei Executive Management Team 05 MESSAGE FROM HUAWEI EMT In 2008, Huawei continued to achieve steady growth, In the future, the availability of future-proof networks with global sales exceeding USD23.3 billion, a year-on- with low Total Cost of Ownership (TCO) and year increase of 46%. Our internationalization efforts innovative services which increase revenue will be the continued to show success and markets outside of key to addressing the rapidly changing challenges of China now account for over 75% of our total sales. operators. Our commitment to our customers and Our major products are widely deployed by leading our position as a trusted partner will enable operators operators in Europe and Japan and we continue to to break bottlenecks in broadband and offer users make steady progress in North America. In emerging ubiquitous, consistent broadband experiences. Our markets, our products are finding increasingly wider All-IP based FMC solutions will enable operators to acceptance and we continue to expand and gain substantially reduce TCO while protecting their initial market strength in these important regions. investment. In emerging markets, operators will be able to get a head-start advantage from our targeted Over the years, Huawei has grown into a true solutions and service models. We are already working market leader, gaining recognition and trust from an with our customers to assist them in strengthening increasing number of leading operators. Credit for competitiveness and reducing energy costs, while this success, is due to our customers, partners and enhancing end-user experiences and generating our dedicated employees and we thank them for their revenue through innovative services. support and confidence in Huawei. Our customers' success will continue to drive In the current global economic situation, the telecom Huawei's growth as a leading global supplier. In 2009, sector is facing many uncertainties. However, we we believe that Huawei will maintain our pace of believe that the global telecom industry will continue steady growth and this will be driven by 3G network to experience dynamic growth over the longer term deployments in emerging markets including the Asia- because communication is a basic human need and Pacific region, and particularly in China. In North telecommunications has become integrated into America and Europe, our consolidated partnership the daily lives of billions of people. New growth will with leading operators will also generate new growth be driven by the continued demands for mobile opportunities. Overall, the increasing recognition of broadband in mature markets, together with the fast Huawei's unique values will strengthen our strategic growing user requirements for easy access to telecom partnerships with leading operators and it will be a services in emerging markets. foundation for our future success. Driven by rapid technological evolution and emerging Huawei's development over the past 20 years has user demands, the boundary between telecom, the taught us that only through customers' success can Internet, digital media and consumer electronics is we succeed. It is for this reason that we will continue becoming blurred, resulting in the advent of a new to optimize our organization and processes and era-a "networked world". In the next few years, promote management efficiency. By promoting a the number of mobile users is projected to exceed value of Customers First, we will continue to strive five billion, while over two billion fixed and mobile to meet customer needs with premium products and broadband users will be tapping into new services services.