ZTE's Euro Star Shines Brighter

ZTE, so often in the shadow of its bigger, more aggressive domestic rival Huawei, is having a good week and one that will likely boost its credibility in markets outside China.

The vendor has just announced improved financials for the first six months of this year, with domestic 4G network rollouts helping it to dramatically improve its net profits and its total sales, news that boosted its share price by almost 16% on the Hong Kong Stock Exchange. While Huawei Technologies Co. Ltd. is about four times as big, ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) is still a major player in its own right: Based on its numbers for the first half of the year, it is a US$14.3 billion turnover company, generating sales from a diversified portfolio sold around the world. (See ZTE Profits Rise on China's 4G Boom and Huawei's H1 Sales Grow 30% to $28.3B.)

Of its $7.15 billion revenues in the first half of 2015, almost 47% came from outside China. And the vendor stated in its financial report that it is focusing more on "comprehensive partnerships with mainstream global carriers."

Today, ZTE announced a "global cooperation agreement" with Telefónica , one of the giants of the carrier world, with extensive operations in Latin America and Europe. ZTE is already a long-standing supplier of fixed, mobile, optical and IMS systems to the Spanish giant, but this agreement takes the relationship into new areas, including PON-based fixed broadband access, photonic mesh optical transport, microwave backhaul and VoLTE/RCS capabilities.

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The reference to fixed broadband developments is, I think, particularly interesting. After years of focus on mobile broadband developments, there is definitely a renewed focus by major operators on how they can effectively boost their fixed broadband access pipes to support their backhaul and cloud services strategies, as well as boosting residential and business user broadband speeds as the race to gigabit broadband gathers pace.

And while much of ZTE's engagement with Telefónica is likely to come in Latin America, the operator's domestic market is proving a hotbed for next-generation, PON-based fixed broadband developments. Just last week we reported on how Orange Spain is putting XG-PON (the next step up from GPON) through its paces as an option for connecting mobile basestations (for fixed-line packet backhaul) and offering commercial broadband services of up to 1 Gbit/s. (See XG-PON Is Alive in Europe… for Now.)

The XG-PON technology being trialed is ZTE's, inherited by Orange Spain from its acquisition of Jazztel, a ZTE customer.

ZTE tells Light Reading that Orange Spain's main focus for its XG-PON trials revolves around mobile backhaul and high-speed symmetrical services for SME customers. The vendor adds that its CEO, Shi Lirong, met with Orange executives in Shanghai recently and discussed how the operator plans to use XG-PON while the next-generation broadband technology, NG-PON2, matures and become more affordable. ZTE believes NG-PON2 will not be ready for commercial deployment "for at least two or three years," though there are others that would argue with that assessment. (See Adtran Claims Advance in NG-PON2 Economics, Calix Enters NG-PON2 Race and Alcatel-Lucent Fires NG-PON2 Starting Gun.)

That's not the only XG-PON action in Spain: ZTE's new best buddy, Telefónica, has already been working with arch rival Huawei on deploying the technology, which is also known as NG-PON1. (See Eurobites: Telefónica Preps NG-PON 1 Rollout.)

Telefónica, naturally, wants to hedge its best, play suppliers off against each other, encourage further technology advances and get the best prices.

That can only be good for ZTE, increasing its chances of engagement with Telefónica in new areas and highlighting its areas of expertise to others.

ZTE is not a stranger to Europe's other major operators: Its relationship with Orange stretches back years, while it also has close ties to Deutsche Telekom and has engaged with various parts of the Telenor empire, as well as winning a number of deals in Eastern Europe. (See Deutsche Telekom Opens 5G:haus, Telekom Austria Builds Voice Core With ZTE and ZTE Expands in Germany.)

Its new agreement with Telefónica can only open more doors across Europe.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

[email protected] 8/27/2015 | 11:33:15 AM
Still a long way to go I think ZTE is often seen in a different light to the other broad portfolio infrastructure vendors but this is a company of soginificant heft -- there are many companies that would like to have annual revenues of $14 billion.

If it wants to emulate Huawei and really make a big name for itself in Europe, I think it needs to commit with local staff and be more visible -- a large stand at MWC in Barcelona only goes so far.

BUt I sense there is renewed enrgy in its European operations... I'll be keeping a close eye on it.

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