UPDATE 1-China's ZTE Q2 earnings up 41.9 pc on year

* Q2 net profit jumps 41.9 percent from a year earlier

* Operating revenue in domestic market up 111.7 percent

* Gross profit margin on carrier networks falls to 32.2 pct (Adds details, analysts comments)

By Kirby Chien

BEIJING, Aug 19 (Reuters) - ZTE Corp (0763.HK)000063.SZ, China's second-largest telecoms equipment maker, posted a 41.9 percent rise in second-quarter net profit, boosted by huge spending on 3G networks by the country's telecom carriers.

Beijing has targeted spending of $58.5 billion on 3G mobile network construction through to 2011 after handing out long-delayed 3G licences earlier this year.

However, reflecting intense competition in the global telecom equipment market, ZTE said its gross profit margin for carrier networks fell to 32.2 percent from 35.4 percent.

"Competition remained intense in the global telecommunications market during the first half of 2009," said the company in a statement to the Hong Kong stock exchange.

To read the exchange's full report click: here

While the global market outlook remains bleak, China's buildout of third-generation (3G) networks more than cushioned the blow for ZTE.

"The results are strong, backed by the building of 3G networks in China," said Joseph Ho of Daiwa Research. "The global economy should begin to contribute to earnings from 2010."

ZTE's second-quarter earnings rose to 704.7 million yuan ($103.2 million) -- based on Reuters calculations -- falling short of the 733 million yuan forecast by Reuters Estimates, but easily topping the 496.5 million yuan recorded a year earlier.

ZTE said first-half net profit totalled 783.37 million yuan.

The second-quarter results come after ZTE posted a first-quarter profit rise of 29 percent to 78.7 million yuan.

SHARES SURGING

The company's share price rose 72.3 percent in the first half of the year, almost double the 38.9 percent climb by Hong Kong's China Enterprises index .HSCE over the same period.

Analysts estimate the company's 2009 earnings will increase 32.9 percent to 2.21 billion yuan, according to Reuters Estimates.

Boosted by spending on 3G networks, the company said operating revenue in the first half jumped 111.7 percent from a year earlier, helping it increase its global market share.

Sweden's Ericsson (ERICb.ST) maintained its 32 percent market share at the top of the mobile network equipment sector in the second quarter, but other leading manufacturers lost ground to ZTE and rival Huawei Technologies [HWT.UL], researcher Dell'Oro said last week.

Huawei increased its market share to 17 percent -- creeping up on Nokia Siemens Networks [NSN.UL], which slipped to 20 percent -- while ZTE's aggressive pricing policy and generous state-run bank support helped it double its market share to 8 percent.

ZTE, which overtook Motorola MOT.N last year as the sixth-largest mobile equipment maker, received a $15 billion credit line from China Development Bank, allowing it to expand its global reach and introduce new technologies. [ID:nLK25823]

Regulators issued 3G licences early this year, releasing billions in pent up spending from China Mobile (0941.HK), the world's largest wireless carrier, and rivals China Unicom (0762.HK) and China Telecom (0728.HK).

Nortel Networks Corp., once the largest North American maker of telecommunications gear, filed for bankruptcy protection in the United States and Canada earlier this year. ($=6.83 yuan) (Reporting by Kirby Chien; Editing by Chris Lewis)