ZTE Hooks Up With Euro Carrier

Chinese vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has boosted its international prospects by signing a technology agreement with European incumbent carrier Portugal Telecom Group (see ZTE Teams With Portugal Telecom).

Today's agreement heightens ZTE's prospects not only in Europe, but also in Latin America and Africa, where Portugal Telecom has a number of mainly wireless operator interests.

And like fellow Chinese vendor Huawei Technologies Co. Ltd., ZTE is counting on greater revenues from outside China, and plans to invest half the $420 million it recently raised from its Hong Kong IPO in international activities (see ZTE Zooms on HK Debut and ZTE: Set for Overseas Explosion).

ZTE has been working hard to break into Western Europe, but has had limited success so far, winning a DSLAM deal with Greek operator OTE S.A., engaging in trials with BT Group plc (NYSE: BT; London: BTA) and Spain's Telefònica SA, and partnering with Marconi Corp. plc (Nasdaq: MRCIY; London: MONI). (See ZTE Lands OTE DSL Deal, BT Puts IPTV to the Test, Marconi Signs Distribution Agreement, and Red Hat Snaps Up Sistina).

The R&D Memorandum of Understanding (MoU), signed this morning in Shanghai, involves product and service development, and gives both companies a chance to enter new markets. It also allows for the two firms to jointly bid for carrier projects.

For ZTE, it cements an existing relationship with the European carrier. In May 2004 it won a $100 million mobile handset deal with Brazilian CDMA operator Vivo, a joint venture between Portugal Telecom (PT) and Telefònica Mòviles SA that has more than 23 million customers. ZTE has also worked with PT on mobile network developments in East Timor, where the carrier holds a 38 percent stake of the national operator.

Now it has a greater chance of forging deals with PT's other subsidiaries in: Macau, a Special Administrative Region of China, where the carrier holds a 28 percent stake in CTM; Africa, where PT holds stakes in operators in Angola, Cape Verde, Kenya, Morocco, and Mozambique; and in Hungary, where PT has a stake in business services provider Hungaro Digitel KFT.

In return, the carrier's R&D technology unit, Portugal Telecom Inovação, can export its products, including network management systems and multimedia service delivery platforms for fixed and mobile operators, to China.

"The Chinese telecoms market… is growing very fast and will provide very good opportunities in the future," states PT's CEO Miguel Horta e Costa in a prepared statement.

ZTE officials were not available for further comment. Portugal Telecom had not returned requests for comment as this article was published.

News of the partnership comes as ZTE said it signed contracts worth $4.1 billion in 2004, up 35 percent on 2003. International contracts accounted for $1.6 billion, about 40 percent of the total.

— Ray Le Maistre, International News Editor, Light Reading

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