Zhongxing Telecom Co Ltd (ZTE), the country's number two telecommunications equipment provider, posted a net profit yesterday of 513.18 million yuan (US$61.8 million) for the first half of this year, registering a growth of 163.5 percent from a year earlier.

Turnover for its core businesses reached 11.77 billion yuan (US$1.4 billion), up 100.7 percent from a year earlier, the company said in a statement. Profits for the core businesses also jumped 108.1 percent to 4.3 billion yuan (US$518 million).

Earnings per share stood at 0.641 yuan (7.7 US cents).

"The strong growth momentum is within our expectations thanks to the strong demand in the domestic market as well as the recovery of international market," said Dai Chunrong, an analyst with China Securities.

"The quick expansion in the overseas market contributed a lot to drive up the company's business performance," Dai said.

The company statement showed that turnover from the international market soared 353.5 percent over the same period of last year to top 2.07 billion yuan (US$249 million).

ZTE is so far competing with its international rivals mainly in developing markets such as Africa and South Asia.

"Products with comparatively low prices but high quality, leading technologies as well as a full range of telecom products and services have enabled ZTE to take an upper hand in international competition," Dai said.

With exports growing, the company foresees its net profit for the first three quarters of 2004 leaping by more than half.

"As the company's business grows, ZTE is focused on controlling its costs and expenses," the company said.

"We are starting to see the benefits of economies of scale, with the speed of growth in profits from our core business generally exceeding revenue expansion."

ZTE and its chief homegrown rival, top telecommunications equipment maker Huawei Technologies, have risen to prominence in recent years, capitalizing on China's multi-billion-dollar telecommunications development to strengthen their own expertise.

Wireless network products and services and handset products continued to be the two major driving forces for development.

Turnover from the wireless network products and handset hit 5.25 billion yuan (US$632 million) and 2.65 billion yuan (US$319 million), respectively.

"We expect the company to sustain its growth in the second half of this year," Dai said.

But the growth rate for the whole year is unlikely to be as high as the first half, she said.

Company sources showed that ZTE has so far inked several key contracts with both domestic and overseas telecom operators for the second half of the year.

For example, last month ZTE signed with China Telecom to deploy about 1 million digital subscriber lines in southern China.

"In addition, the company's impending initial public offering (IPO) in the Hong Kong market will further boost the company's performance," Dai said.

Shenzhen-listed ZTE disclosed earlier this year that it had revived a plan to list shares in Hong Kong next year. It said it planned to issue stocks totaling 20 percent of its outstanding share base to develop new products and overseas business.

But the company did not mention the plan yesterday.

The company's previous proposal was to raise about US$500 million in the stock market.

ZTE said it intends to use proceeds from next year's planned IPO to expand its international market presence, conduct research and develop new products and technology.

(China Daily September 1, 2004)