Chinese money could rescue handset market

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Chinese money could rescue handset market

Microscope contributor

With the mobile handset market in freefall in recent months,Chinese telecommunications equipment and network solutions provider ZTE is offering to remedy the global economic slump after announcing a partnership with the government-backed China Development Bank to extend $16bn worth of credit to its global customers.

ZTE's said its plans were to ramp-up the expansion of its existing business as a supplier into virtually every sector of the wireline,wireless, service and mobile handheld markets.

"The Chinese banks have more than two trillion [dollars] of foreign currency reserves. They cannot invest that in the domestic market – it has to go abroad," said Lin Cheng, ZTE's president for Western Europe.

In order to channel this, the banks are looking for national enterprises with international experience, and according to Cheng, ZTE fits the bill.

Unlike most other Chinese telecom companies, ZTE is publicly-held and quoted on the Hong Kong stock market. The fastest-expanding sector of its business is the handset division, where year-on-year sales revenues have been growing at around 70%,with more than 50 million handsets shipped last year.

Traditionally it has targeted the low-end segment, with 2G and 3G devices customised for mobile network operators. However, with established vendors like Nokia struggling in the current climate, ZTE said it was seizing the opportunity to move into the mid- to high-end segments with price-competitive, customisable offerings.

Lin Cheng surmised that the chief inhibitor to 3G take-off in the Western world was high handset prices, but he added that now, thanks to the scale of 3G sales in China where the technology is already well established, "3G handset prices are in free fall", and will soon be on a par with 2G prices.

"This won't make Nokia happy," he said. "But it's a fact."

The $16bn credit line raises the question of whether ZTE maybe trying to buy business, a particularly sensitive subject for the company – a $300m contract with the Filipino government in 2007 was subsequently scrapped following allegations of commissions and kickbacks to high-ranking officials.


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