The Econet agreement also gives the company a foothold in New Zealand, where it has not had a presence, and could lead to other types of business.

Last month, Huawei reported sales of US$8.2 billion for last year. With more than half of that - US$4.76 billion, up 108 per cent from 2004 - coming from overseas markets, international expansion has become a key strategy for the company, said Huawei Australia managing director Rio Zhang.

'The China [telecoms] market is quite mature. [Capital expenditure] isn't growing very fast compared with global markets,' she said.

That New Zealand has only two mobile players is particularly attractive, she said.

'The situation in New Zealand is that they don't have large competition in the mobile and 3G area. The business model is quite good to support Econet.'

But analysts suggest the country's mobile market is indeed mature with the two incumbents, Telecom New Zealand and Vodafone, competing for 3.8 million customers in a population of 4.2 million.

That saturation, along with fierce rivalry between the two, will make it difficult for any newcomer to enter the market.

'You absolutely have to question the viability of an exercise like this,' said telecommunications analyst Paul Budde, who likened Econet to a mouse getting involved in a fight between two elephants.

'There's a huge chance that you simply get trampled.'

The absence of proper mobile regulations could also make it difficult for Econet and Huawei to roll out a full network.

There are no rules that enforce roaming and co-location of transmitting equipment on competitors' towers. There is also no mechanism that prevents closed-network pricing which allows providers to charge users different amounts to connect to competitors' networks, said Econet New Zealand executive director Tex Edwards.

'Econet is going nowhere if that problem isn't fixed,' Mr Edwards said. 'It actually becomes the most important part of the regulatory menu.'

Australia's biggest telecommunications company, Telstra, last year called off a plan to build a 3G network in New Zealand because the regulatory situation was 'ugly'. A Goldman Sachs JB Were report says Econet has a realistic prospect of developing a network but that it probably will 'come down to a government decision as to whether or not to alter the current regulatory environment'.

The government is reviewing the Telecommunications Act including cellular network provision rules and plans to announce amendments by the middle of the year. With New Zealand near the bottom of telecommunications investment among high-income countries, industry analysts see Huawei's possible involvement as a strong incentive for the government to sort out the rules.

If the regulations are there, there is definitely room for an Econet-Huawei combination - especially if it can be significantly disruptive to the market, analysts say.

Mr Budde said since New Zealand had some of the highest mobile costs in the Organisation for Economic Co-operation and Development, Econet could be a 'price buster'. If the company were to succeed, it would need to undercut Telecom and Vodafone prices by at least 50 per cent.

Mr Edwards would not confirm that this model was the one Econet would use, but said: 'There's plenty of room for price reduction.'

Nevertheless, analysts say the move into New Zealand is good for Huawei, regardless of whether the Econet network succeeds.

'Given that they're coming from a zero base, it's all upside potential for them,' said IDC New Zealand telecoms analyst Christopher Loh, adding that Huawei's low-cost networking equipment could also prove disruptive to rival suppliers.

'Local competitors such as Cisco and Juniper could be affected.'

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New Zealand mobile-phone market numbers

NZ$2b in service plus interconnection revenue in 2005

Market share is split between Vodafone with 53pc, and Telecom with 47pc

3.8m customers in a population of 4.2m, or a 92pc penetration rate

100pc mobile-phone penetration is expected this year

Average revenue per user for the latest quarter was down at both Telecom and Vodafone, despite both companies rolling out 3G services last year. Telecom saw a dip of 6.8pc to NZ$34.10, while Vodafone fell 5pc to NZ$50.70

New Zealand calls are among the most expensive in the OECD countries

In 2003, New Zealand ranked 41st out of 42 high-income countries in telecoms investment. Total investment per capita was US$66.80, compared with leader Norway at US$568.70