The Shenzhen telecoms equipment firm will lend $500m to land first contract Huawei Technologies has signed an agreement to supply $900 million in third-generation (3G) mobile-phone network equipment to cash-strapped Sunday Communications. The deal will include a $500 million loan from the mainland's largest telecommunications equipment supplier to Sunday. Proceeds from the loan will be used to pay down outstanding debt to Sunday's existing equipment supplier, Nortel Networks. Huawei will also help Sunday obtain a bank loan and export credit for the remainder of the $900 million contract. The vendor financing is critical to Sunday, which became profitable this year but had net debt of $493 million in June and little spare cash to build its 3G network. But it also represents a risk to Huawei. It is taking on $500 million in exposure to land its first 3G supply contract. Under terms of the deal, Sunday must repay the loan in 21/2 years in semi-annual instalments. No collateral will be provided. 'With Huawei, we are confident of having the right partner to be able to lead the industry in Hong Kong when we do launch,' Sunday group managing director Bruce Hicks said. Sunday is one of four 3G licence holders in Hong Kong and hopes to launch services as early as the fourth quarter next year. But competitors have expressed doubts about Sunday's choice of a 3G vendor, saying Hong Kong's smallest mobile operator had picked Huawei because of its financing terms rather than its technology. Mr Hicks said Huawei had outbid four international vendors in an extensive selection process. The Shenzhen-based company, which has invested about four billion yuan developing WCDMA networking equipment, competes with suppliers such as Ericsson to offer better prices and financing terms to customers. Under the deal, Huawei will provide $500 million in financing for the supply contract, estimated at $850 million to $900 million. Sunday will finance the shortfall with loans it expects to receive from international and mainland banks and export credits in the next few months. The deal is seen as helping both sides, but the long-term benefits remain unknown. Lehman Brothers analyst Peter Miliken said the arrangement was ideal between a company that urgently needed a 3G contract and a firm needing money for 3G network roll-out. 'Will it be a good 3G network? Maybe or maybe not. It will probably be a decent network, but it may take longer to roll out,' Mr Miliken said.