Aug. 17 (Bloomberg) -- ZTE Corp., China's biggest publicly traded phone-equipment maker, plans to raise 4 billion yuan ($526 million) selling convertible bonds to help fund development of products that use a Chinese high-speed mobile technology.

Shareholders will meet Oct. 16 to vote on the proposed sale of the bonds, ZTE said in a statement to Shenzhen's exchange today. Holders of the notes, which can be swapped for shares, will receive call warrants for each five-year bond they possess, it said, without saying how many warrants will be linked to the sale.

The funds will account for less than half the 10.7 billion yuan ZTE has earmarked for developing technology including third- generation mobile gear. The Shenzhen, south China-based company raised investments on new products as local carriers cut spending while they await the introduction of high-speed wireless services.

``Spending by Chinese carriers on 3G will be a huge market opportunity for ZTE over the next couple of years,'' said Steven Liu, an analyst at DBS Vickers Ltd. who rates ZTE shares ``buy.''

ZTE shares fell 1 percent in Shenzhen to 55.81 yuan at the end of trading, compared with a 2 percent decline in China's benchmark CSI300 Index on concern a global credit crisis is worsening. ZTE's Hong Kong-listed shares fell 1.7 percent to HK$28.80, while the Hang Seng Index declined 1.4 percent.

Subprime Borrowers

The company plans to sell the bonds because ``it's not as easy to borrow money with the subprime situation,'' Liu said.

Mortgage defaults, among high-risk so-called subprime borrowers, arising from a U.S. housing recession have prompted banks to rein in lending, draining liquidity from global credit markets.

ZTE yesterday reported a 33 percent jump in first-half profit to 459.8 million yuan from a year earlier. Sales increased 44 percent to 15.2 billion yuan.

Proceeds from the planned bond sale will be used to fund 11 development projects that include network equipment and handsets for the time division synchronous code division multiple access, or TD-SCDMA, standard, ZTE said, without give a timeframe for the spending.

The company in June won a 2.37 billion yuan contract to build a 3G trial network for China Mobile Communications Corp., the parent of the world's biggest wireless carrier by users, using the TD-SCDMA technology.

Chinese carriers may spend $20 billion building 3G networks, according to estimates from CLSA Ltd. analyst Francis Cheung. Regulators have said China will unveil 3G services in time for next summer's Beijing Olympics, without giving a more details.

To contact the reporter on this story: Jiang Jianguo in Shanghai at jjiang@bloomberg.net; John Liu in Shanghai at jliu42@bloomberg.net

Last Updated: August 17, 2007 05:09 EDT