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SCMP Reporter

Telecommunications equipment vendor ZTE has played down the advantages of tapping into the potential of third-generation (3G) mobile telephone services in the mainland, emphasising instead on expansion in emerging markets overseas.
At a presentation to about 150 fund managers and investors yesterday to promote its H-share offering, ZTE management said overseas sales would be the firm's key earnings driver and that their revenue contribution would more than double in the next few years.
Fund managers said the A-share company, which is selling 141 million H shares at $17.50 to $22 each, spent more time promoting its overseas expansion plan than the prospects of a 3G business.
By planning to spend 60 per cent of the proceeds from the offering - or about  $1.58 billion - to expand overseas, ZTE expects foreign sales to rise to 30 per cent of its revenue from 13 per cent. 
It said its low-cost advantage would make it more competitive in winning contracts in emerging markets such as India, South Africa and Indonesia.
Some investors at the presentation said they were surprised to hear ZTE pitching itself as a low-cost manufacturer for 'the world market'. 
Its failure to promise a dividend payout also disappointed some.
ZTE's effort to promote its overseas expansion as its future growth engine contrasted with sponsor Goldman Sachs' sales pitch, touting 'long-term 3G success as critical if ZTE is to focus on technology leadership rather than cost'.
In a research report, the US investment bank detailed ZTE's advantages in tapping the 3G business, noting its close relations with local carriers as well as the government's strategic decision to boost the telecommunications equipment manufacturing industry.
ZTE's apparent repositioning comes amid increasing concerns that Beijing will further delay handing out 3G licences.
When asked to assess the impact if the licences were not issued next year, ZTE said it would be limited because its existing 2G business and overseas expansion would continue to drive earnings growth.
However, ZTE has ramped up investment in 3G research and development.



ZTE pushes sales in emerging markets