Bloomberg writes…ZTE Corp., China’s biggest publicly listed telephone equipment maker, won orders from China Mobile Communications Corp. to equip part of the nation’s first high- speed wireless network. The company’s stock surged.
The gear will help China Mobile build a network based on domestically developed wireless technology after negotiations are completed, ZTE said in a statement to the Shenzhen Stock Exchange, without specifying financial terms. ZTE clinched about 3.2 billion yuan ($414 million) in orders, according to Chinese industry group TD-SCDMA Forum.
The contracts are China Mobile’s first orders for a network that may cost an estimated $3.1 billion, moving the world’s largest mobile-phone market by subscribers a step closer to introducing so-called third-generation wireless services. The government has said it will offer 3G services for the 2008 Beijing Olympics.
“It’s important for ZTE to win orders at the start because China Mobile will have to buy more equipment from ZTE when they expand the network,” Randy Zhou, who rates ZTE shares “underperform” at Bank of China International in Shanghai.
Shares of ZTE rose as much as 8.2 percent in Shenzhen today and were trading 4 percent higher at 49.05 yuan as of the 11:30 a.m. mid-day break.
Ericsson, Datang
Ericsson AB, which partnered with ZTE in bidding for the contracts, probably received about 260 million yuan in orders for the time-division synchronous code division multiple access gear, Chen Haofei, secretary general of the TD-SCDMA Forum, said in a telephone interview.
Datang Telecom Technology Co.’s venture with Alcatel-Lucent won orders of about 2.45 billion yuan, Chen said. TD Tech Ltd., a venture between Siemens Communications Group and Huawei Technologies Co., and China Putian Corp., will also supply equipment to China Mobile, he said.
Li Jun, a spokesman at China Mobile, declined to comment. Alcatel and Datang Mobile won preliminary orders for equipment to be used in the cities of Guangzhou and Shanghai only, said Cao Yong, a Shanghai-based spokesman for an Alcatel venture in China.
China Mobile’s spending on the network will bloat to about 24 billion yuan after spending 7 billion yuan on network equipment, 12 billion yuan on infrastructure, and more than 4 billion yuan on handsets, Chen said. China Communications Services Corp., the engineering unit of China Telecom Corp., may get contracts for construction, he said.
The TD-SCDMA Forum was formed in December 2000 by eight companies to promote and develop the use of the technology. Members include China Mobile, China United Telecommunications Corp., China Telecommunications Corp., Datang, Huawei Technologies Co., Motorola Inc., Nortel Networks Corp. and Siemens AG.
Delayed Orders
Regulators have delayed the high-speed services, which allow faster Web browsing and downloads, to give Chinese companies such as ZTE and Huawei Technologies Co. time to perfect their TD-SCDMA equipment. Chinese carriers may buy 205 billion yuan of 3G equipment, according to government-backed industry group China Mobile Communications Association.
China Mobile has submitted the list of companies to the National Development and Reform Commission, the nation’s top economic planning agency, for approval, Chen said. The operator may announce the contracts next week, Chen said.
Sales of TD-SCDMA equipment may contribute 2.4 billion yuan in revenue to ZTE’s 2007 earnings, UBS AG analyst George Chu wrote in a February report.
China added 6.5 million mobile phone users in February for a total of 473.9 million, according to ministry figures. The nation added 67.7 million wireless users last year, more than the population of France.
