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China's biggest listed telecom firm ZTE and France's Alcatel said they would cooperate in making CDMA mobile networks, adding another player to the already overcrowded market.
ZTE also launched three new handsets for the fast 3G mobile standard which it wants to sell in Europe, adding to the huge competitive pressure on the world's top phone makers like Nokia, Motorola and Samsung.
CDMA is a mobile phone technology widespread in the United States, Latin America and parts of Asia. The GSM standard is far more popular, but CDMA is growing fast, especially in emerging markets, where the need to build new networks is still large.
Alcatel, which has its own core networks and services for CDMA but not the radio access technology, will use ZTE's base stations for its CDMA systems.
"This cooperation will allow both companies to better address the growing demand for CDMA-powered fixed or mobile broadband services," the two firms said in a statement.
The deal is also likely to put further price pressure on other CDMA vendors like Nortel Networks, Lucent, Motorola and Ericsson, which fight for new orders in a market seen growing only a few percent this year after double-digit expansion last year.
Alcatel’s vice president for marketing and business development Sylvie Richir said the deal would help cut prices.
Price competition on the networks market has already eaten into gross margins of Ericsson and Alcatel, sending their shares down. Nokia, which does not make CDMA networks, warned that competition would toughen this year as demand growth slows.
The Alcatel deal also boosts the position of the still small ZTE among mobile network makers at a time when the threat from Asian manufacturers to established Western players is growing.
China is among the world's fastest growing markets for mobile services, but Chinese manufacturers of telecom equipment like ZTE and Huawei, which are based in Shenzhen, are also looking for contracts outside Asia.
Huawei won a contract for a 3G network in the Netherlands in December and ZTE said Monday it would go on a road show of 10 European countries between March and July to market its 3G networks.
To stave off some of the Chinese competition and secure a foothold in the fast growing market themselves, Western companies like Nortel, Siemens and Marconi have already teamed up with Chinese partners.
The CDMA standard is a digital mobile technology that enables multiple customers to simultaneously share a common transmission bandwidth. The GSM standard can carry only eight simultaneous calls on the same frequency.
(Shenzhen Daily February 16, 2005)
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