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Zhongxing Telecom (ZTE) is China's largest listed telecom equipment vendor and global network solution provider. In 2004, the company recorded contract sales of $4.1 billion and handset sales of over 10 million units. In India, ZTE has a mission to provide end-to-end services, from telecom equipment to network planning and optimisation. In an interview with tele.net, Renjun Zhang, president, South Asia, talks about how ZTE views the Indian telecom market...

When did ZTE start operations in India? Could you list some of the contracts won by the company in the recent past?

ZTE started its Indian operations in 2001 and won its first contract in July 2002, when it was selected by BSNL to construct a national transmission backbone network. The contract worth Rs 1.3 billion was followed by another with BSNL to supply a CDMA network for nine major states. Thereafter, ZTE realised that it could be even more successful if it tied up with Indian partners. In August 2003, ZTE signed an agreement with ITI to make a range of CDMA equipment. In September 2003, ZTE's two partnerships emerged as the lowest bidders for the supply of 740,000 lines of CDMA 2000 1X equipment to BSNL. We also recently submitted an expression of interest to BSNL for manufacturing CDMA mobile phones and fixed wireless terminals.

How does ZTE view the Indian market in terms of business opportunities?

ZTE is ramping up its presence in India, which it considers one of the fastest growing telecom markets. We want to be counted among the top three vendors in the country in the coming few years. Since there is a lot of similarity between China and India, we want to bring our experience and success to India.

What products and solutions does ZTE offer?

ZTE has a wide range of products and technology spanning wireless, wireline and handset products. The wireless products cover GSM, CDMA and WCDMA systems. The wireline products cover switch, broadband access and optical transmission.The handset products cover GSM, CDMA and WCDMA technologies.

What are your strategies for entering the handset segment?

ZTE already has a contract with MTNL to supply 50,000 CDMA handsets. This deal is worth about Rs 190 million. This clearly demonstrates ZTE's strength in terminals. Further, ZTE India will place emphasis on private players as well for this product line. In the near future, ZTE will have a formidable presence in CDMA terminals, in the public and private sectors.

When will your new factory in Manesar, Haryana become operational?

It is expected to become operational some time in 2005. Through this factory we want to establish our logistics centre in India to meet future requirements locally. Also, it will help us save on customs duties. We will thus be able to become more price competitive.

Who are ZTE's clients in the country?

Among government operators, we are providing services to both MTNL and BSNL. Among the private operators, our clients include Tata Teleservices, Reliance Infocomm, Spice Communications and BPL Mobile. We also recently supplied GSM equipment to Spice and BPL. The feedback has been very positive. Also, with operators looking to get into the rural areas, our cost effectiveness will work to their advantage. We have successfully helped operators in other countries to roll out services in low-revenue-generating areas. We will be able to use this experience to assist Indian operators for the same.

Do you perceive broadband taking off in India? What role do you see for ZTE in this?

ZTE broadband technologies are being deployed extensively. The high cost of dialup connectivity and poor quality of user experience is only going to help the broadband market. Until recently, customers' requirements were primarily for browsing and e-mail. Now, the requirement is for internet telephony, VPN chatting, and downloading files. This shift has increased the bandwidth requirement per user.

What are the concerns that currently face the telecom equipment industry?

We expect duties, local taxes, octroi, etc. to come down in 2005. This has been one area of concern in the past. These duties currently constitute a sizeable cost for equipment manufacturers, almost 15 to 20 per cent. While handset duties have come down steadily over the past couple of years, there have not been similar duty cuts for set-top boxes, cable modems, etc.

ZTE was recently listed on the Hong Kong Stock Exchange. Could you elaborate?

Since ZTE is expanding its presence in the global market, we require large capital in order to undertake investments. Being listed on the Hong Kong Stock Exchange, recognised as one of the most highly regulated markets, will enable us to garner greater confidence among our investors. Also, through this listing we hope to improve our management capabilities.

What are ZTE India's plans for 2005?

The Indian market is only second to China when it comes to growth. Our cost effectiveness is our advantage and since India is price competitive, we expect to do well. Also, as I said earlier, we hope to be among the top three vendors in the country in the near future.