One day after rival Huawei Technologies Co. Ltd. announced record annual revenues, fellow Chinese vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has also issued fiscal results that counter the global economic gloom, and announced the formation of a new business unit that will target "high-end telecom markets" in Europe and North America.

ZTE says its first-quarter revenues were up 35 percent year-on-year to 11.67 billion Yuan Renminbi ($1.7 billion), thanks mainly to new 3G infrastructure business from China's major carriers. (See China’s Operators Prep Next 3G Wave.)

That helped drive revenues attributed to the vendor's Carrier Network Business up by 47 percent compared with a year earlier, "driven mainly by revenue generated from 3G and GSM network building," noted ZTE in a filing with the Hong Kong Stock Exchange, while revenues from handsets grew more than 22 percent.

Profit margins are still very low, however. While net income grew 29.2 percent compared with a year earlier, it was still only RMB78.7 million ($11.5 million). ZTE's share price inched up by 0.9 percent to HK$28.15 by the close of trading Thursday.

Now the vendor, which last month unveiled significant 2008 growth of its own, plans to more aggressively pursue new business in Europe and the U.S. by "setting up an independent business unit." (See ZTE Ramps 2008 Revenues and ZTE Secures $15B, Highlights R&D.)

It has had limited success to date in Western Europe, especially compared with rival Huawei, and is also just breaking into the North American market. (See ZTE Wins CDMA Deal in US.)

ZTE, which has dedicated much of its international expansion efforts in growth markets in Asia/Pacific, Africa, and Latin America to date, couldn't be contacted for further details as this story was published.

It seems clear, though, that the company is looking to develop close relationships, involving joint R&D work as well as technology contracts, with more large operators to add to the engagements it already has with the likes of Deutsche Telekom AG (NYSE: DT) and Orange (NYSE: FTE). (See T-Mobile Picks ZTE and FT, ZTE Team on R&D .)

Just last month the company announced a $15 billion credit line that will be used to help fund further R&D and international expansion. The company also outlined its key areas of technology development, including: PON (Passive Optical Networks); IMS (IP Multimedia Susbystem); next-generation mobile technologies such as LTE-Advanced and SDR (software-defined radio); OSS (Operations Supports Systems); and next-generation optical systems. (See ZTE Secures $15B, Highlights R&D.)

Meanwhile, ZTE is milking its domestic market for all its worth as the three main carriers -- China Mobile Ltd. (NYSE: CHL), China Telecom Corp. Ltd. (NYSE: CHA), and China Unicom Ltd. (NYSE: CHU) -- pump billions into their new networks. ZTE says it has won "a number of tenders for 3G network projects and terminal products," claiming leadership in WCDMA, which is being deployed by China Unicom.

"Driven by 3G construction projects in China, the demand for wireless network products from mainstream carriers in the domestic market grew rapidly during the reporting period, while investments in transmission and data products were also steadily on the rise," ZTE noted in its filing.

— Ray Le Maistre, International News Editor, Light Reading