Shenzhen-based telecommunications equipment maker ZTE Corp. on Monday denied it had offered kickbacks to Philippine Government officials to win a deal worth US$330 million.

ZTE, China's second-largest telecommunications equipment provider, said it had secured the contract for the project in accordance with international practice, as well as laws and regulations in the Philippines.

"ZTE is confident that the investigation will eventually clear its good name and reveal that ZTE's proposal is, in fact, superior and the most cost-efficient as well as the most advantageous to ... the Philippine people," a company statement said.

On Saturday, Philippine Trade Secretary Peter Favila said President Gloria Macapagal Arroyo had suspended the deal with ZTE after it triggered a kickback scandal that threatened to shake her government and split her allies in Congress.

A ZTE project manager who declined to be identified confirmed the suspension of the deal yesterday in the Philippines over the phone.

The suspension of the agreement with ZTE to build a broadband network linking state agencies comes two days after Arroyo's Cabinet defended the contract at an inquiry into allegations of kickbacks in the project.

The Philippine Supreme Court had earlier stopped the implementation of the deal after it received two separate petitions to scrap the project.

Philippine political analysts have said the scandal could affect the stability of Arroyo's government as her husband was named in the senate inquiry.

Jose de Venecia III, head of a telecoms firm that lost out on the broadband contract, told an earlier Senate hearing that the deal with ZTE was overpriced by at least US$130 million to provide kickbacks to senior government officials.

De Venecia also said Arroyo's husband had told him to "back off" from the deal, signed in April.

De Venecia is the son of House of Representatives Speaker Jose de Venecia, head of the dominant Lakas party, part of the ruling coalition along with Arroyo's smaller Kampi party.

Chinese industry analysts said the accusation against ZTE might have gone beyond business, implying the company is facing an attack from its rivals who have strong political backing.

Shenzhen- and Hong Kong-listed ZTE has expanded to more than 100 countries and regions including the United States and Europe. It's the first time the company has encountered such an accusation and suspension of a deal ordered by a country's president in its 12-year history of international expansion.

(Shenzhen Daily September 26, 2007)