Less than a week after predicting a brighter outlook for the mobile equipment market, market-leader Ericsson has announced new deals worth US$1.44 billion to expand the GSM networks of China’s two largest mobile operators, China Mobile and China Unicom.
The deal with China Mobile is valued at US$1.3 billion while the China Unicom contract is worth another US$140 million. The two operators have a combined subscriber base of around 550 million.
Under the framework agreement with China Mobile, Ericsson will be one of the main suppliers of core and radio network equipment, along with related technical support and services, to expand GSM/GPRS coverage and capacity in 19 regions across China. The Swedish firm will also help China Unicom expand its GSM networks in 10 regions across China, including Beijing. Both projects are scheduled for completion before the end of the year.
Jan Ihrfelt, an equity analyst at Swedbank, told Reuters that the size of the deals “wasn’t too surprising” as both operators had recently raised their capital expenditure guidance. China Mobile said last month that its capital expenditure in 2008 would reach 127 billion yuan (US$18 billion) – well above earlier analyst forecasts of around 98 billion. China Unicom said it intended to lift capital spending 18% in 2008 to around 31 billion yuan.