US Firms Reap $2 Billion China Telecom Windfall

Several bellwether U.S. technology firms got a major boost Tuesday as Chinese telecommunications firms dished out more than US$2 billion worth of contracts to such firms as Intel (Nasdaq: INTC), Motorola (NYSE: MOT), Lucent Technologies and Juniper Networks.

The Telecommunications Industry Association said four Chinese companies awarded the contracts, totaling $2.32 billion, at a signing ceremony in Washington, D.C.

Motorola emerged as the biggest winner, signing a $556 million deal with China United Telecommunication, known as China Unicom, and a $510 million contract with China Mobile Communications.

The same two Chinese firms ordered some $350 million worth of equipment, including packet switches, from Lucent. They also agreed to buy equipment and services from Cisco Systems, UTStarcom and Canada-based Nortel Networks.

Vital Market

Regardless of their relative sizes, the deals may mean more to some of the companies involved, particularly those such as Motorola and Lucent that have relatively few customers for their high-end long-distance network hardware.

"If you look at the possible buyers for major mobile network infrastructure, the pool wasn't that large to begin with," Yankee Group analyst Shiv Putcha told the E-Commerce Times. "Given the amount of consolidation in the mobile industry, the big equipment providers need to open up new markets."

Few markets, Putcha added, offer the upside of the Chinese national market in particular and the Asia-Pacific arena in general. The Yankee Group has predicted that the overall Asian market for mobile users will grow far faster than the market in the rest of the world, averaging at least 12 percent growth per year for the next four years.

"The region has had its stops and starts, but it appears poised for some steady, strong growth," he said.

Just the Beginning?

U.S. officials were eager to portray the deals as the start of a better balance of trade with China, which sells far more goods in the Unites States than it buys from the U.S.

Telecommunications Industry Association president Matthew J. Flanigan told the E-Commerce Times that the deals also symbolize the enormous potential of the Chinese marketplace for U.S. companies that are positioned to take advantage of the world's fastest-growing economy.

"China has the potential to be the largest telecommunications market in the world, and the opportunities for U.S. companies are equally impressive in scope," Flanigan said.

He noted that the TIA has had a presence in mainland China since the mid-1990s and that its work with then-fledgling Chinese Internet and telecom firms is paying off in the form of a solid reputation for American companies wishing to do business there.

Welcome Boost

The news was no doubt welcome to all of the companies that won contracts, though some, such as Intel, already are riding long winning streaks in terms of revenue growth and profits.

Lucent, for instance, won $350 million worth of deals, though it will have to share at least part of that windfall with Juniper Networks. Together, the companies will provide their joint core data networking solution to China Unicom. A Lucent spokesperson said the product will help reduce future operational and expansion costs for the Chinese company.

Meanwhile, Alameda, California-based UTStarcom won a $200 million contract to provide its Personal Access System infrastructure to China.

Playing Along

Interest in China by U.S. businesses has been strong since the first signs surfaced that the Internet-fueled technology boom was waning, with Web companies among the first to seek a foothold in the country.

That trend continues, with Yahoo announcing Wednesday that it will form a partnership with Sina.com to create an Internet auction site for the Chinese market.