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China Telecom

Comba plans to gear up transmission networks

PUBLISHED : Friday, 29 December, 2006, 12:00am
UPDATED : Friday, 29 December, 2006, 12:00am

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Wireless equipment provider hopes to tap China's 3G telecoms development


Wireless equipment provider Comba Telecom Systems plans to invest more in its wireless transmission business to benefit from the development of China's third-generation telecommunications services and the strong growth in developing countries.


Its wireless transmission business, including digital microwave systems, grew 875 times to HK$20 million for the six months to June, accounting for 3.4 per cent of sales, against 0.5 per cent a year earlier.


Last year, Comba started to provide plesiochronous, or nearly synchronous, digital hierarchy (PDH) networks, which have transfer speeds of four to 34 megabits per second (Mbps), for firms including China Telecom and China Unicom.


It also launched super-PDH networks of 66 to 100Mbps and synchronous digital hierarchy (SDH) networks of 155.52Mbps this year.


'The higher the transfer speed, the wider the data transfer pathway for 3G operators,' Comba chairman and president Tony Fok Tung-ling said.


The Guangzhou-based company previously won a contract from China Telecom to set up SDH networks in Guangdong.


Mr Fok declined to disclose the size of the contract but said Ericsson and Alcatel were also selected as solution providers.


In September, the firm reported first-half turnover grew 42.7 per cent to HK$589.5 million from last year, boosted by increasing sales to China Mobile. Net profit rose 26.8 per cent to HK$45.5 million.


Revenue from China Mobile accounted for 65 per cent of Comba's first-half sales and China Unicom accounted for 22 per cent.


'Besides urban areas, we received orders to set up telecommunications networks in the rural areas of Tibet, Xinjiang and Inner Mongolia,' Mr Fok said.


The company expects to boost sales 50 per cent after the mainland government issues licences for 3G networks next year.


Comba faces intensifying competition in the mainland, which helps to drive down prices. Its gross margin dropped 5.7 percentage points to 42.9 per cent in the first half.


'Comba mentioned that there were 40 companies bidding for orders in China,' Merrill Lynch analyst Min Lu said in a September report, which took a 'neutral' view on the company's stock. 'We think Chinese operators' bidding practice could bring further downward pressure on the margin.'


The report said revenues for equipment makers would surge due to the shift by China telecommunications operators to 3G networks, but gross margin could be questionable.


Comba's overseas sales represented 7.2 per cent of its first-half revenue, compared with 3.6 per cent a year earlier, boosted by strong growth in India, Africa and the Middle East. Their contribution may grow to 10 per cent in the full year, Mr Fok said.


Sales of wireless enhancement solutions, which accounted for 85 per cent of the company's first-half revenue, rose 35.6 per cent to HK$465.7 million.


'We are the biggest provider of wireless enhancement solutions in China, with a 25 per cent market share, equal to the sum of the second and third-largest players,' Mr Fok said.


Revenue from subsystems and antennae jumped 131 per cent to HK$44.8 million, accounting for 7.6 per cent of sales.


'For subsystems and antennae, we will soon become the market leader in China because of more outsourcing contracts from international equipment companies,' Mr Fok said.


The company recently started to sell smart antennae, which can automatically fine-tune signal outputs according to changes in the environment.