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3G/HSPA

Mobile, Optical Fuels ZTE's Growth

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) continued its trend of year-on-year growth during the third quarter, reporting revenues of 10.6 billion Yuan Renminbi (US$1.55 billion), up 29 percent compared with a year earlier.

The encouraging numbers follow similar increases in the first six months of this year, and provide the company with some positive news to talk about following a recent dent to its credibility. (See Telenor Bans ZTE From New Deals and ZTE Pumps Up Sales.)

Making money from its business engagements is still obviously a challenge, however, as the Chinese vendor is still struggling to generate significant profits from its growing turnover.

In the three months to the end of September, ZTE reported a net income of just RMB303.7 million ($44.4 million), though that was at least somewhat better than the previous year's RMB180.8 million ($26.4 million).

During the first nine months of the year, ZTE reported revenues of RMB30.3 billion ($4.43 billion), up by 29 percent year on year, and net income of RMB973 million ($142 million), 32 percent better than in 2007. (See ZTE Unveils 9M Results.)

The vendor said it benefited from increasing demand for its GSM infrastructure, optical gear and mobile handsets during that nine-month period, and that it seized "opportunities derived from changing global economic conditions" -- or, put another way, carriers turned to ZTE even more for cheaper products. (See ZTE Touts Optical Success, ZTE Wins India Deal, ZTE Wins in Ethiopia, ZTE Touts GSM Growth, and ZTE Wins in Kenya.)

And the vendor is looking forward to a bumper fourth quarter too as the Chinese carriers begin a significant upgrade and extension of their mobile networks following the recent industry reorganization. (See China Begins $70B Carrier Revamp and China Telecom Unveils CDMA Plans.)

The company says it's about to "commence domestic supply and delivery of CDMA and TD-SCDMA products based on successfully tendered contracts, as well as commence preparatory work on a WCDMA project it secured."

China Mobile Communications Corp. recently announced a large-scale TD-SCDMA rollout in the coming year. (See China Mobile to Unleash 3G Next Year.)

And unconfirmed reports coming out of China -- for example, this one from Beijing-based Marbridge Consulting -- suggest ZTE has landed a significant portion of China Telecom Corp. Ltd. (NYSE: CHA)'s initial CDMA infrastructure contracts.

Various media sources agree that ZTE and arch local rival Huawei Technologies Co. Ltd. have landed about 25 percent each of the CDMA contracts awarded by the carrier: Marbridge believes ZTE's share of the spoils is worth RMB2 billion ($292 million).

The other vendors believed to have won smaller CDMA deals from China Telecom are Alcatel-Lucent (NYSE: ALU), Motorola Inc. (NYSE: MOT), Nortel Networks Ltd. , and Samsung Corp.

— Ray Le Maistre, International News Editor, Light Reading

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