ZTE's third-generation (3G) mobile business could be a key growth asset - or a substantial risk - to the mainland equipment maker's earnings growth, according to its listing sponsor. 'We believe a 3G rollout in China will be the biggest driver of growth, and ZTE's growth outlook would be significantly reduced if 3G does not happen,' the sole sponsor for ZTE's US$350 million H-share offering, Goldman Sachs, said in a research report. If ZTE did not deliver the right 3G technology and was unable to secure its mainland 3G business in two to three years, the launch could hit earnings potential, it said. Goldman expects the mainland to delay issuance of 3G licences until late next year. The government's plan to boost the domestic equipment-making industry meant domestic vendors such as ZTE and Huawei Technologies were most likely to benefit from the growth of the mainland's 3G business, Goldman said. 'A major catalyst would be the government deciding to increase the domestic company share of the infrastructure equipment and handset market,' the report said. 'We believe it is not only from a business perspective that the authorities want to involve local companies, but also from a national security perspective. The government would definitely prefer to have a couple of domestic players to develop in-house proprietary technology so that China can achieve communications security.' Domestic equipment vendors have so far achieved a less than 5 per cent share in the mainstream GSM/GPRS wireless infrastructure market. Assuming preferential treatment from the state, Goldman expected mainland equipment makers could receive as much as 30 per cent of the country's estimated 30 billion to 40 billion yuan in annual 3G capital expenditure. ZTE was one of the 12 vendors participating in the government-backed field trials concluded in September. Goldman believes the early-stage co-operation with China Mobile, China Telecom and China Netcom during the field trials could help ZTE win future 3G orders from the carriers. The Hong Kong stock exchange approved ZTE's H-share initial public offering last week. Goldman invited fund managers to a pre-marketing presentation yesterday. 'The ZTE IPO will be an interesting one and, depending on the valuation, we will be taking a stake,' one fund manager said, citing ZTE's market share and high product quality. ZTE is selling up to 160.15 million H shares to raise US$350 million, with about 60 per cent of the proceeds used to expand overseas business and the rest for product development. It will launch an international roadshow next Monday, with pricing to be fixed on December 2. Listing is scheduled for December 9, a week before Air China's US$1 billion IPO, to avoid competing head-on for capital. Air China and its sponsors are in talks with key investors such as Citic Pacific and Henderson Land.