MOBILE FAIR-ZTE says in 'cooperation' talks with Motorola

BARCELONA Thu Feb 14, 2008 7:06am EST

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BARCELONA Feb 14 (Reuters) - Chinese mobile phone maker ZTE Corp (0763.HK) is in talks with Motorola Inc MOT.N about wider cooperation, an executive for the company said in an interview at the Mobile World Congress.

ZTE is looking to boost its share of the global market for mobile phones, and Motorola, the world's No. 3 handset maker, has said it is looking at options that could include a separation of its loss-making cell phone unit.

Asked whether ZTE would consider a merger with Motorola's phone unit Xiong Hui, a marketing vice president for handsets would not comment, but said ZTE was in talks about deepening its relationship with Motorola.

"We've been keeping in touch with Motorola on a wider cooperation," Hui said through a translator in an interview with Reuters. He did not give specific details about the companies' existing ties or their future plans.

While Motorola said this week it was committed to its mobile devices business, some analysts have speculated a deal could still happen and ZTE could be a potential suitor for the Motorola unit. Others have said it would be difficult for the smaller company to handle such a deal.

Analysts have estimated that Motorola's phone unit could be worth about $9 billion to $12 billion. Asked about this price tag, Hui declined comment on the prospect for a merger but said ZTE was strong financially.

"If we wanted to raise money we have the ability to do it," he said.

ZTE is a relatively small player in the mobile phone market but it has grown rapidly in the last few years by offering cheap phones, and it aims to break on to the list of top five vendors within three years.

The company wants to increase its devices sales to more than 50 million units in 2008 from about 30 million in 2007, including wireless data cards and phones, he said.

Hui said ZTE plans to offer more higher-end phone models and to build its brand, shying away from making phones for other brands, a lifeline for many smaller handset vendors.

"We will not be a contract manufacturer to any brand," he said. (Reporting by Sinead Carew and Tarmo Virki in Barcelona; Editing by Jason Neely)

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