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Asia

Local Rival for Huawei, ZTE?

11:50 AM -- The Chinese government has decided to merge two state-owned telecom equipment vendors, China Datang Corp. and Potevio Co. Ltd. , to make them more competitive and provide a decent-sized third player in the domestic communications network equipment sector behind Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), reports China Daily.

The government also hopes the move will help spur the further development of home-grown 3G standard TD-SCDMA, which has been deployed by a seemingly reluctant China Mobile Ltd. (NYSE: CHL). (See AlcaLu Wins China 3G Deal.)

Any merger, which is set to happen before the end of this year, would likely involve Datang's telecom unit, Datang Telecom Technology Co. Ltd. , which has been instrumental in the development of TD-SCDMA. The vendor is now also working on TD-Long Term Evolution (LTE), which is something it needs to do to hang on to its China Mobile account. (See Ericsson, Datang Team for TD-LTE, Datang Picks NetLogic, China Mobile Swaps Out Datang 3G Kit, and Agilent, Datang Work TD-SCDMA.)

Datang Telecom is believed to have generated revenues of 3.21 billion Yuan Renminbi (US$474 million) and net profits of CNY57.5 million ($8.6 million) in 2009, when its sales ramped 83 percent because of the massive investment in 3G networks in China. (See China Pumps $15B Into 3G.)

Potevio, (formerly Putian), makes a range of mobile and fixed network equipment products (active and passive gear), as well as mobile devices and Service Provider Information Technology (SPIT) systems. Details of its financials are more hazy.

It's unlikely that, even when combined, Datang and Potevio's telecom business could rival Huawei and ZTE for sheer scale and financial clout, but state-owned companies are always forces to be reckoned with in China. (See Huawei Doubles Profits in 2009 and ZTE Grows 36% in 2009.)

— Ray Le Maistre, International Managing Editor, Light Reading

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