ZTE Seeks Europe, Asia 4G Network Orders to Catch Alcatel

ZTE Corp. (000063) said it’s seeking orders for faster wireless systems in Europe, Southeast Asia and South America as China’s second-largest maker of phone-network equipment tries to catch Alcatel-Lucent SA in market share.

The company is bidding for fourth-generation Long Term Evolution equipment contracts with “high-quality carriers,” said Liang Ming, a manager at ZTE’s 4G business. The Shenzhen, China-based company plans to increase its global market share among carriers using the LTE technology to 15 percent to 20 percent next year, he said, without giving this year’s estimate.

“We are in talks with major carriers,” Liang said in an interview in Hong Kong yesterday, declining to identify them. “These carriers do not bear high risks in their finance and operations.”

ZTE is expanding overseas as China, the world’s biggest mobile-phone market, hasn’t begun commercial fourth-generation network service in the mainland. Chairman Hou Weigui this month said the company aims to be one of the world’s top-three suppliers of wireless-network equipment in the next two years, which would mean passing Alcatel-Lucent and Nokia Siemens Networks Ltd., now ranked third and fourth globally.

ZTE “attempts to win share with aggressive pricing and financing,” Pierre Ferragu, a London-based analyst at Sanford C. Bernstein & Co., said in an e-mail. The resulting orders are “most of the time with challenged operators in deep need for financing, which usually doesn’t turn into good quality business,” he said.

Stock Rises

Ferragu rates ZTE underperform, the equivalent of a sell.

ZTE rose 0.6 percent to close at HK$12.64 in Hong Kong trading, after earlier gaining as much as 1.6 percent to a two- month high. The shares have declined 48 percent this year.

The company only lags behind closely held Huawei Technologies Co. among Chinese suppliers of phone-network equipment.

ZTE’s bids for 4G contracts include carriers in Malaysia, Indonesia, Russia, Germany, Belgium and Brazil, Liang said. ZTE won’t take “high-risk” projects, he said. Delayed overseas contracts led to a 1.95 billion yuan ($313 million) loss last quarter.

In the first half of this year, ZTE’s sales of network equipment ranked behind Huawei, Ericsson AB (ERICB), Alcatel-Lucent and Nokia Siemens Networks, according to Geng Yang, a Hong Kong- based analyst at BOCI Research Ltd.

China Mobile

ZTE captured 24 percent of equipment orders for the initial 4G trial network of 20,000 base stations built by the state- owned parent of China Mobile Ltd. (941), Liang said. As the carrier expands that trial to 200,000 4G base stations next year, ZTE plans to maintain or increase its share, he said.

ZTE gained a weapon this month for its pursuit of overseas orders: The China Development Bank gave the company a $20 billion facility that ZTE can use to help finance sales of equipment and related services abroad, according to a Dec. 4 company statement.

There were 10 TD-LTE networks that had begun commercial service in nine other countries as of July, according to the Global TD-LTE Initiative, a group founded last year by China Mobile and other network operators to promote the technology.

The number of markets with TD-LTE networks may double or triple next year, Liang said.

Countries already with commercial TD-LTE service include Saudi Arabia, Japan, Brazil, the U.K., Poland, Denmark, Sweden, India and Australia, according to the Global TD-LTE Initiative. There were 52 TD-LTE network trials around the world as of June, and more than 26 operators had commercial deployment plans, according to the group.

“LTE networks are expected to roll out on a large scale next year, and move from developed markets to mid-sized markets,” Liang said. “This is a very important opportunity for a company like ZTE.”

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

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

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