August 23, 2010 / 3:34 AM / 9 years ago

UPDATE 2-China's ZTE wins Telenor Hungary network deal

* Deal includes key provision to build 4G LTE network

* Deal worth 200 million euro - report

* Marks latest inroad to Europe for Chinese company (Adds analyst quote, background; updates share price)

By Doug Young and Melanie Lee

HONG KONG/SHANGHAI, Aug 23 (Reuters) - ZTE Corp (0763.HK) won a mobile network order from the Hungarian unit of Norway’s Telenor (TEL.OL), a deal one report valued at 200 million euros, marking a big win for the Chinese firm as it looks to build 4G networks.

Mobile equipment makers are in a heated bidding war to build fourth-generation (4G) mobile networks, called LTE, seen as the future of mobile communications with their high-speed data capabilities.

ZTE has rolled out seven LTE commercial networks and 50 trial LTE networks globally to date, as it and crosstown rival Huawei Technologies [HWT.UL] win global deals against traditional powerhouses such as Ericsson (ERICb.ST) and Nokia Siemens Networks [NSN.UL].

ZTE has had the most success exporting to developing markets in Asia, Africa and Eastern Europe, but has made less inroads with major contracts in developed markets such as the United States and Europe.

The latest Telenor deal marks a major development for ZTE by opening the door for it to develop an LTE network down the line, although it will probably focus on building older second- and third-generation networks first, analysts said.

ZTE benefited from its strength in developing markets and lower costs, said Wilson Chai, an analyst at Mirae Asset Securities.

“If you are a newcomer in a market and you are looking to build a network, you aren’t going to use Nokia or Ericsson because they charge a premium. If you can have something similar at a cheaper price, why not go for ZTE or Huawei,” he said.

ZTE did not give the value of the deal, but the Financial Times reported it would be worth 200 million euros ($254 million).

Under its latest deal, ZTE will build a complete network for Telenor Hungary, including LTE capabilities, in addition to older 2G and 3G technology, ZTE said in a statement.

The company said it would provide the European carrier with radio and core infrastructure over the next five years.

ZTE shares erased losses and were up 1.5 percent midway through the Hong Kong trading day on the news, beating a 0.4 percent drop in the broader Hang Seng Index .HSI.

ZTE has previously built similar networks for Telenor, which has major presence in emerging markets, in India and Montenegro.

“For ZTE, LTE is still a couple of years away to have a real contribution to the company,” said an analyst at a major western brokerage, speaking on condition his name not be used due to company policy.

“It’s a nice first step to be able to get their foot into some of these markets. It’s also a PR thing: the more people talk about ZTE doing 4G, the more others will want to do 4G business with them.”

Last week, ZTE’s quarterly earnings missed market forecasts, as a ban on its equipment sales to India over security concerns hit its top and bottom lines. [ID:nTOE67G04T]

But prospects for the second half look better with the pending resolution of the impasse. (Reporting by Doug Young; Editing by Chris Lewis and Anshuman Daga)

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