China's top telecoms equipment maker Huawei Technologies yesterday formed a partnership with British telecoms equipment maker Marconi Corp Plc, which could help the Chinese giant extend its reach into the European market.

Under a memorandum of understanding, "Marconi will distribute a certain number of Huawei's carrier-grade data products to its key customers," while "Huawei will distribute Marconi's next-generation access radio products to its key customers," the two firms said in a statement.

Negotiations are continuing with a definite agreement expected to be signed before the end of Marconi's financial year in March.

The two firms said they have discussed how Marconi can use its extensive services structure to support Huawei's pursuit of an equipment business in the European market.

And they are also in talks to jointly develop products by sharing research and development resources and technologies.

"This is an important first step in what we believe will be a long and mutually beneficial working partnership," said Mike Parton, chief executive officer of Marconi.

"The next stage of our relationship will be to jointly develop new products that would then be sold through our mutual distribution channels."

The tie-up could give Marconi bigger access to the Chinese market.

The deal underlines Huawei's growing desire to build a strong presence in Europe which the firm has singled out as its major growth market overseas.

Marconi said its client list includes many of the world's largest telecommunications operators.

Huawei's overseas sales last year more than doubled to hit US$2.28 billion, accounting for 41 percent of total revenues.

Huawei's spokesman Fu Jun said the firm is stepping up efforts to crack the European market and expects a jump in sales in Europe.

Huawei aims to increase its annual overseas sales to US$4 billion this year and US$10 billion in 2008.

The firm last December landed a landmark 3G (third generation) mobile communications network deal in the Netherlands, worth an estimated US$400 million, beating out Ericsson in the process.

It is the first 3G network contract a Chinese firm has won in a developed country.

Huawei has seen sales surge in developing countries in recent years but the firm has hardly made a mark in developed markets.

Last week, Huawei won a US$186 million contract to build a CDMA (code division multiple access) mobile network in Thailand.

The collaboration with Marconi may prove a big challenge for US firm Cisco Systems, which dominates the global market for data products like routers and switches which direct Internet traffic.

Last October, Huawei announced a partnership with Germany's Siemens, a deal that will see the German firm re-sell Huawei's routers and switches.

Fu said Huawei's cooperation with Siemens is targeting corporate users while the deal with Marconi is targeting telecoms carriers.

Huawei also runs a joint venture with US-based 3Com which manufactures mid-range and low-end routers and switches.

Analysts said it will be a long time before Huawei can take a significant bite out of Cisco and Juniper's market share.

In 2003, Cisco held a 51 percent share of the global router market while Juniper had a 29 percent stake.

(China Daily February 1, 2005)