ZTE Bankrolls Canadian Mobile Network

New Canadian CDMA network to be kickstarted with $350 million loan from Chinese bank, brokered by equipment supplier ZTE

June 24, 2010

2 Min Read
ZTE Bankrolls Canadian Mobile Network

The rollout of a new CDMA mobile network in Canada is to be bankrolled by a $350 million loan from the Export-Import Bank of China, a deal brokered by network equipment vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

Public Mobile Inc. , which aims to offer unlimited voice and text services in Ontario and Quebec, secured the loan by striking a vendor financing deal with the Chinese vendor.

The loan is just one of a number arranged by ZTE since the vendor announced a $10 billion credit line with the Export-Import Bank of China in May 2009 and a $15 billion credit line with the China Development Bank in March of the same year. (See Sistema Shyam Secures $70M Loan, ZTE Bags Another $10B in Credit, and ZTE Secures $15B, Highlights R&D.)

Privately, rival equipment suppliers are unhappy with the arrangements between Chinese vendors and Chinese banks, as they claim such loans are offered at a rate (0 percent, some say) that enable ZTE and other Chinese firms such as Huawei Technologies Co. Ltd. to offer cut-throat vendor financing deals with which they cannot compete. (See Huawei's Lucky Number: 30B and Huawei, ZTE Strike New Funding Deals.)

Public Mobile's loan will be used to source network infrastructure, professional services, and handsets from ZTE. (See Public Mobile Builds CDMA Net With ZTE.)

Public Mobile, which launched its services in Toronto on May 26, already has financing arrangements in place from a number of shareholders, including Columbia Capital and M/C Venture Partners . It has also received funding from the Ontario Municipal Employees Retirement Systems (OMERS).

And the services startup is already planning for the future, as it has sourced equipment from ZTE that should enable a relatively painless upgrade to Long Term Evolution (LTE) in the future. (See LTE Watch: More Verizon Speed Tidbits.)

The operator, though, faces a tough challenge to build a profitable business in an increasingly fierce competitive environment. It's the third new mobile operator this year to challenge the established carriers, BCE Inc. (Bell Canada) (NYSE/Toronto: BCE), Rogers Wireless Communications Inc. (NYSE: RCN; Toronto: RCM), and Telus Mobility .

The other new entrants are Globalive Communications Corp. , which offers its services under the Wind Mobile brand, and Mobilicity, which has handed over its network to Ericsson AB (Nasdaq: ERIC). (See Ericsson Wins Managed Network Operations Contract, Intec Wins Wind Deal, AlcaLu Wins in Canada, and NSN Wins 3G Deal.)

— Ray Le Maistre, International Managing Editor, Light Reading

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