Global telecoms giant ZTE sees gold in Chinese roots

Sun Mar 24, 2013 5:16pm EDT
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By Lee Chyen Yee

HONG KONG (Reuters) - China's ZTE Corp, which helped bring the telephone to millions of homes during the Deng Xiaoping era, is counting on a new generation of tech-savvy smartphone users to drive at least $7.5 billion of 4G network projects and elevate its sagging fortunes.

Shenzhen-listed ZTE, founded in the mid-1980s, clinched its first major overseas contract in Bangladesh in the mid-1990s. Since then, it has been aggressively expanding overseas and challenging telecoms equipment manufacturers such as Ericsson and Alcatel-Lucent in emerging markets from Asia to Africa.

But years of rapid overseas investment and chasing global market share at the expense of profitability are finally taking their toll on the world's No.5 producer of telecoms gear. ZTE is now returning to its Chinese roots, eyeing 4G network contracts from domestic mobile operators China Mobile Ltd, China Unicom Ltd and China Telecom Corp Ltd.

"The China market is like a gold mine as telecom operators are cash-rich," David Dai Shu, a spokesman for ZTE, told Reuters. "It is a top priority for us by country."

China's three mobile operators plan to spend a combined 345 billion yuan ($56 billion) this year on network expansion. That includes investment in 4G, which promises rapid data downloads for millions of mobile users holding Apple Inc's iPhones or Samsung Electronics' Galaxy phones.

Hong Kong-listed China Mobile, the world's top carrier with 715 million subscribers, is forking out 41.7 billion yuan from its total spending of 190.2 billion yuan for this year to build 200,000 4G base stations covering more than 100 cities.

The Chinese government is expected to issue 4G licenses later this year.

Smaller rival China Unicom said on March 21 it planned to spend 5 billion to 10 billion yuan annually on 4G once it gets a license. China Telecom has yet to announce its 4G investment.   Continued...

ZTE company logos are seen at an international software and information services exhibition in Nanjing, Jiangsu province September 6, 2012. REUTERS/China Daily