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Persistent ZTE Forms India JV

Light Reading
News Analysis
Light Reading
11/24/2006

Chinese equipment vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has found a way around the Indian government’s objection to its expansion there -- it’s forming a joint venture with MCorpGlobal , a management group whose businesses include mobile operator Spice Telecom .

Both ZTE and Huawei Technologies Co. Ltd. have applied to expand their investments in India to set up manufacturing facilities and offer wholesale equipment services, but they’ve been spurned repeatedly by the country’s Foreign Investment Promotion Board.

The Indian government has cited concerns over exposing its telecom networks to a Chinese company, and has taken a protectionist stance in an attempt to boost domestic telecom vendors. (See India Leery of Foreigners, ZTE and India Blocks Foreign Telecom Gear.)

Local media reports that ZTE signed a three-year agreement with MCorpGlobal on Tuesday -- ZTE chairman Hou Weighui was part of the business delegation accompanying Chinese president Hu Jintao on his visit to India this week.

The joint venture will initially import, distribute, and sell telecom equipment, and plans to branch out into network planning, systems integration, network optimization, and operations and maintenance services. The deal also includes setting up joint R&D and manufacturing facilities to develop low-cost equipment for operators in emerging markets.

Despite the concerns of India's security ministry, the country’s state-owned carriers have been keen to do business with ZTE and Huawei as they build out their network capacity to accomodate growth. ZTE was recently awarded part of a 6 million-line broadband expansion contract by Bharat Sanchar Nigam Ltd. (BSNL) , while it was beaten by Huawei for a 2 billion Indian Rupee ($44.9 million) contract with Mahanagar Telephone Nigam Ltd. (MTNL) to roll out 500,000 broadband lines in New Delhi.

— Nicole Willing, Reporter, Light Reading

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