UPDATE 2-Telenor ousts ZTE from tenders for ethics breach
(Adds ZTE comment, details, background)
OSLO, Oct 13 (Reuters) - Norwegian telecoms group Telenor (TEL.OL) said it has suspended Chinese telecoms equipment maker ZTE (0763.HK)(000063.SZ) from tenders for new business for six months after it breached its code of conduct.
"We have suspended ZTE from participating in tenders and new business opportunities for a period of six months ending March 3 next year," Telenor spokesman Dag Melgaard said on Monday.
"The move is based on a breach of Telenor's code of conduct in relations to a procurement process," he said, declining to give further details about the incident.
Melgaard said the move covered "all of the Telenor group and all its operating companies worldwide."
ZTE's spokesman said he was unaware of the situation but would make checks and respond if needed.
Telenor has come under pressure in Norway to reinforce its ethical standards after reports of poor working conditions and child labour practices at its subcontractors in Bangladesh.
ZTE has previously won business from industry peers such as Ericsson (ERICb.ST) and Nokia Siemens Networks [NSN.UL] -- a 50-50 joint venture of cellphone maker Nokia (NOK1V.HE) and Germany's Siemens (SIEGn.DE) -- mostly as a result of its low prices.
An analyst at a major European bank, who declined to be identified due to the sensitivity of the situation, said the market would be surprised by this development because similar cases involving ZTE were rare.
The analyst speculated ZTE may have been too aggressive in securing tenders and might have contravened procedures, though he stressed he had no knowledge of the case.
"The direct earnings impact (of the news) would be small," the analyst said, adding that ZTE focused on emerging markets from the Middle East to Southeast Asia and Africa. "But this could certainly affect their reputation in the market."
ZTE, China's second-largest maker of telecoms equipment, has in recent years tried to make inroads into more mature markets in Europe, diversifying from its stronghold in emerging markets in an effort to get more lucrative contracts.
This year, some analysts had looked with favour on ZTE as it, along with larger rival Huawei [HWT.UL], had been expected to benefit from a planned, large-scale rollout of third-generation networks across China, the world's largest telecoms industry.
ZTE shares have fallen 37 percent in Hong Kong since the start of the year, against a fall of 41 percent for the wider market .HSI, as a result of the global financial crisis. (Reporting by Wojciech Moskwa in Oslo, Tarmo Virki in Helsinki and Edwin Chan and Joanne Chiu in Hong Kong; Editing by David Holmes and Simon Jessop)
