ZTE Scores LTE TDD/FDD Deal

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has won a landmark contract with Hi3G Access AB in Sweden and Denmark to roll out what could be the first dual-mode 4G networks that support both Long Term Evolution (LTE) and Long Term Evolution Time Division Duplex (LTE TDD). (See Hi3G Does Dual Mode LTE With ZTE.)

The contract also calls for ZTE to deliver 3G equipment for the 900MHz bands in Sweden and Denmark, according to a Hi3G spokesman.

Hi3G's existing 3G suppliers in Sweden are Nokia Networks and Ericsson AB (Nasdaq: ERIC). Nokia Siemens supplies the radio access equipment to Hi3G's 3G network sharing operation with Telenor Group (Nasdaq: TELN)Sweden, called 3G Infrastructure Services AB , which accounts for about 70 percent of Hi3G's network in the country. Ericsson's radio access equipment covers Stockholm, Gothenburg, Malmo and Karlskrona.

In Denmark, ZTE will supply just the LTE network to Hi3G. The operator's Danish 3G network is supplied by Ericsson. The Swedish vendor also supplies mobile core equipment to Hi3G in both Denmark and Sweden.

"We have chosen ZTE for additional 3G 900/2100 rollout and for LTE mobile broadband networks in Sweden and Denmark because of the possibility to house three different mobile standards in the same physical infrastructure and the low cost of ownership," said Hi3G CEO Peder Ramel in a press statement. "Furthermore, ZTE advanced LTE dual-mode solutions and quick consignment responses really meet our requirements."

Hi3G has pieced together a mix of TDD and FDD spectrum holdings recently to build its LTE business case.

Earlier this year in Sweden, Hi3G acquired 50MHz of TDD spectrum in the 2.6GHz frequency band from Intel Capital for an undisclosed sum. Intel had paid 159 million Swedish kronor (US$25 million) for this spectrum in an auction in May 2008, with the intention of developing it for WiMax. (See Swedish 4G and Sweden Awards 800MHz Licenses.)

In Denmark, Hi3G acquired 25MHz of TDD spectrum in the 2.6GHz band in an auction. The operator's spokesman did not specify how much Hi3G paid for this license, but said that what it paid for the TDD spectrum was about 3 percent of the cost for an equal size of FDD spectrum in the same auction. (See More Euro Auction Action.)

Why this matters
While this may not be a massive deal in terms of the size of the networks, it is certainly a feather in ZTE's cap to land an LTE contract like this in the Nordic region -- the home turf of its European rivals Ericsson and Nokia Siemens. Hi3G has sold ZTE's handsets and modems before, but this will be the first time that Hi3G has used ZTE's network equipment.

In terms of the network technology, it is also a coup for ZTE to deliver the first dual-mode FDD/TDD LTE network.

As for Hi3G in Sweden and Denmark, the operator is living up to its reputation for being a market challenger and innovator. The decision to use TDD spectrum, which is far less expensive than FDD spectrum, looks like the foundation for a cunning and compelling business case for LTE services.

About this time last year, Hi3G was still focused on ramping up speeds on its 3G network, while its competitors in Sweden were racing ahead to build their LTE networks. Now that the traditional 3G operator has made its LTE move, rivalry in the already competitive 4G markets will intensify even further. (See Europe Fires Up Faster 3G .)

The losers here are Nokia Siemens and Ericsson, Hi3G's existing suppliers, because neither has managed to get a bite of Hi3G's first LTE business.

A similar scenario played out in Austria recently, where ZTE used its vendor financing muscle (courtesy of favorable terms from Chinese banks) to poach business from Nokia Siemens. (See MWC 2011: 3G Austria Dumps NSN for ZTE.)

For more
Operators in the Nordic countries are LTE trailblazers and here's the background on their latest 4G moves:

— Michelle Donegan, European Editor, Light Reading Mobile