The world's top network equipment maker Cisco Systems has signed a deal with China's No 2 telecoms equipment maker ZTE Corp to jointly tap into the local telecoms market.

The deal, the latest tie-up in China's telecoms sector, will see Cisco and ZTE jointly develop telecoms solutions for telecoms operators in China as well as the Asia-Pacific region, excluding Japan.

The solutions will include the industry's latest technologies such as NGN (next generation network) and 3G (third generation) mobile telecoms and data technologies.

Cisco and ZTE said they will also explore additional opportunities to jointly develop customer solutions and collaborate to meet customer requirements.

The deal comes just as speculation is rife that China is set to award operators early next year with licences to build 3G mobile networks. This would lead to big deals for equipment sellers.

Industry analysts have been expecting Chinese operators to spend a total of US$10 billion or even more on 3G networks.

In the past few months, major global telecoms giants such as Siemens, Alcatel, Ericsson and Nokia have formed joint ventures in China with local firms, focusing on 3G telephony.

It's unclear whether Cisco and ZTE will eventually launch a joint venture.

A spokeswoman with Cisco China said Cisco and ZTE have set up an office working on the details of the tie-up.

The tie-up is expected to give a boost to the two companies' competitiveness in the telecoms sector where various technologies are becoming increasingly converged.

And that will help Cisco and ZTE stake out a bigger share of the 3G and NGN market.

Zhong Hong, ZTE's vice-president and general manger for ZTE's data division, said the tie-up, combining ZTE's strength in both fixed-line and wireless telecommunications and Cisco's strength in routing and data communications, will offer customers a unique solution.

Cisco is the world's largest vendor of routers and switches which direct network traffic.

"Cisco and ZTE have very strong skills and complementary strengths that will provide excellent value for our customers in this region," said Owen Chan, senior vice-president in charge of Cisco's Asia-Pacific operations.

The tie-up is expected to put pressure on ZTE's domestic rival Huawei Technologies, the top telecoms equipment maker in China.

Huawei is now also a rising rival for Cisco in the router and switch market. It is also becoming a major supplier of the mobile telecoms sector, competing with ZTE and foreign giants such as Ericsson and Nokia.

Cisco last month launched a research and development (R&D) centre in Shanghai with a promised investment of US$32 million within five years as part of its expansion drive in China.

Cisco has been becoming increasingly aggressive with tie-ups, mergers and acquisitions (M&A) in the technology sector in anticipation of the convergence of various technologies.

Last week the firm announced plans to buy Scientific-Atlanta, a leading maker of TV set-top boxes for Time Warner and other cable companies in the United States.

The US$6.9 billion cash deal is expected to give Cisco rapid access to the digital entertainment hub, one of the most promising markets in the technology sector.

(China Daily November 23, 2005)