Investors take punt on equipment vendors
Shares in several mainland-based telecommunications equipment vendors including ZTE Corp yesterday gained as investors expect them to receive billions of yuan worth of orders after the recently announced industry restructuring.
ZTE, a key telecommunications equipment vendor, rose as much as 7 per cent to HK$38.90 in the morning session before closing at HK$36.35, up 1.11 per cent. Its Shenzhen-listed A shares fell 0.73 per cent.
Shares in Comba Telecoms Systems Holdings, a network signal amplifying solutions provider, gained 19.25 per cent to HK$2.85.
China Communications Services Corp, a telecommunications construction firm owned by China Telecommunications Corp, rose as much as 5.8 per cent to HK$7.16 before finishing at HK$6.80, up 0.44 per cent.
Analysts said Shenzhen-based ZTE would be a main beneficiary of the restructuring as the company could expand its revenue base from new spending on third generation mobile services by telecommunications operators.
Beijing said at the weekend that it would issue three 3G licences after merging the six telecommunications operators into three, a move analysts expect to happen before the end of the year.
China Mobile, China Telecom and China Unicom are expected to be granted the licences once the industry restructuring is completed.
'ZTE could maintain 40 per cent of revenue growth in the next two to three years as the operators could resume boosting spending on existing networks and 3G services,' Lisa Li, a telecommunications analyst at China International Capital Corp, said in a research note yesterday. 'The company could benefit from the deployment of the homegrown TD-SCDMA network.'
ZTE has won more than half of the orders from China Mobile Communications since last year for the commercial trials of the TD-SCDMA network.
Credit Suisse forecasts the capital expenditure in the mainland's telecommunications sector will increase 5 per cent next year and 9 per cent in 2010.
'We expect ZTE will gain through organic growth and market share,' Wallace Cheung, analyst at Credit Suisse, wrote in a research note yesterday.
