ZTE to Sell 4G Smartphone With China Mobile Hong Kong

ZTE Corp. (762), China’s second-largest maker of phone equipment, will sell its first fourth-generation handset through China Mobile Ltd. (941)’s Hong Kong unit as it works toward a goal of doubling smartphone sales this year.

ZTE will announce plans to sell the Grand X LTE (T82) through the carrier as early as next week, Cynthia Chan, a spokeswoman for China Mobile Hong Kong, said by phone yesterday. Kevin Liu, ZTE’s regional brand director for Asia, didn’t immediately reply to an e-mailed request for comment.

ZTE, based in Shenzhen, wants to “transform” itself from a supplier of wireless network gear by focusing more on mobile devices, Executive Director He Shiyou said in April. It became the world’s fourth-largest mobile-device seller in the fourth quarter behind Nokia Oyj, Samsung Electronics Co. and Apple Inc., and the company’s smartphone sales may double this year as it gains market share in Europe, North America, Brazil and Japan, it said in January.

“The launch of this phone is another step in ZTE’s expanding smartphone range,” said Lisa Soh, a Hong Kong-based analyst at Macquarie Group Ltd. The high end device may help boost ZTE’s profit margins, depending on sales volume, she said.

By 2015, mobile devices will account for 50 percent of ZTE’s sales, up from 40 percent this year, He said in April.

The Grand series of devices is intended to be ZTE’s “high- end flagship offering,” the company said in a June statement.

China Market

ZTE fell 0.2 percent to HK$11.32 at the close in Hong Kong, paring an earlier decline of as much as 1.6 percent. China Mobile declined 0.3 percent to close at HK$82.60.

The 4G service lets users download games and videos on their phones at the fastest speeds available as operators compete for users in Hong Kong, where the number of mobile customers is twice the population.

It’s important for ZTE to build a relationship with China Mobile as the world’s largest phone company by subscribers prepares to expand its 4G service across China, said Alen Lin, an analyst at BNP Paribas Securities Asia in Hong Kong.

“I view China Mobile’s Hong Kong market as a test bed for its own 4G service in China, in terms of network operations, devices and marketing strategy,” Lin said. “It does pave the way for when China Mobile launches 4G.”

Trial Stage

China Mobile’s state-owned parent company this year will expand its 4G trial to nine cities, from six last year, and add 20,000 base stations to the 900 it tested last year, the company said in March. The number of 4G base stations will exceed 200,000 next year, the telecommunications carrier said.

ZTE’s Grand X LTE (T82) phone uses the MSM8960 chip from Qualcomm Inc. and runs Google Inc.’s Android 4.0 operating system, according to ZTE (763)’s June 19 statement. It has a 1.5 gigahertz dual-core processor and an 8-megapixel main camera, the company said at the time.

ZTE’s device will compete with China Mobile Hong Kong’s current 4G handsets, which include the Samsung Galaxy SII; HTC Corp.’s One XL; and LG Electronics Inc.’s Optimus True, according to the carrier’s website.

“The first launch in Hong Kong will be good for ZTE,” said Cynthia Meng, a Hong Kong-based analyst with Jefferies Group Inc. “It shows ZTE can do it, and that a meaningful telco has chosen to cooperate with them, so this is a very good reference.”

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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