Overseas mergers limit opportunities for Huawei and ZTE to expand The path to global expansion is getting narrower for Chinese telecommunications equipment vendors as their multinational rivals merge and transform into more formidable industry suppliers. Huawei Technologies and ZTE Corp, once poised for a run on markets worldwide, now must figure how to catch up with a new round of consolidation instigated by Nokia and Siemens, market experts said. 'The stakes have become higher for the Chinese players,' said Duncan Clark, the chairman and managing director of research firm BDA China. Mr Clark said international sales for Huawei made up 58 per cent of its revenue last year and ZTE about 68 per cent, to help prop up the two companies' annual results but the recent mergers in their industry could put a squeeze on those expansion efforts. Nokia and Siemens yesterday unveiled plans for a 50-50 joint venture intended to merge the Networks Business Group of Nokia and the carrier-related operations of Siemens. The new company, Nokia Siemens Networks, will have a world-class fixed-mobile convergence capability, a complementary global base of customers, a deep presence in both developed and emerging markets, and one of the industry's largest and most experienced service organisations. Mr Clark said that initiative was kick-started by the earlier announced merger between Alcatel and Lucent Technologies. The combined Lucent and Alcatel is expected to be better equipped to serve the needs of the telecommunications service provider community and benefit from having more funding for research and development. Chinese telecommunications gear vendors will find its larger rivals targeting the same growth markets, led by the Europe-Middle East-Africa region where capital expenditure by service providers reached US$56.4 billion last year. The Asia-Pacific region, excluding Japan, was the third-largest market after the United States. 'They will also find it tougher to sell equipment in their own home market,' Mr Clark said. That would be an unwelcome scenario for the mainland vendors in light of China's plans for 3G mobile systems and development of next-generation networks capable of handling the so-called triple play of voice, video and data services. BDA estimates show Huawei leading telecommunications gear sales to mainland service providers with a 16 per cent market share last year. Ericsson, Alcatel Shanghai Bell, ZTE and Motorola are the other top vendors. By next year, the Alcatel-Lucent company would close the gap with Huawei and Ericsson on the mainland. The Nokia-Siemens joint venture would also cover more ground with a combined 8 per cent market share and catch up with ZTE. Stephane Teral, an analyst at Infonetics Research, said: 'The prospect of having China as the world's fourth-largest economy builds the case for more mergers and acquisition activity that will create more super vendors to respond to large, complex network infrastructure projects.'