The CEO Interviews: Shi Lirong, Senior Vice President, ZTE

How significant a role has your African division played in your international expansion plans?
ZTE started targeting the African market about seven years ago. We believe that the market has a lot of potential the penetration of telecoms in the region is very low. We have initially focused on countries with a large population, such as Kenya, Nigeria, Zambia, Ethiopia and Algeria. These are our target markets and we have found scope for our solutions in these regions, particularly wireless, both GSM and CDMA. It is very efficient and cost effective to set up wireless networks, so we focus on these solutions in Africa. We are also trying to provide financing facilities for customers. In some African countries, the carriers haven t enough money to invest in infrastructure, so ZTE has long-term agreements with banks and insurance companies to target opportunities in the region.

What has been the largest barrier to ZTE s effort to expand internationally?
We have met some challenges in international markets. One is the cultural experience and the second is the brand. Until now, operators have cooperated with companies from the West, so it is very important to build a brand. We are hoping that once we have set up local teams and local strategic partnerships, we can overcome these difficulties. But after seven years in the region ZTE s brand has become better known.

Are you happy with the size of your operations in Africa and how well would you say ZTE has adapted to the nature of the local market?
ZTE has a lot of offices in the region but we are still trying to develop the localisation of the team. This is very important. If you want to provide services more quickly and in a much better way, we need a local team and local support centres even some local training centres. We have set up about ten local support centres but we still want to expand on this. In Egypt, we have set up a CDMA and 3G laboratory with Telecom Egypt.

Have you any plans to start manufacturing in the region?
I think we will start this. We are hoping, if we can sign up some good partners, to set up some local manufacturing.

The common perception is that ZTE and Huawei have pursued a strategy so far of competing in new markets on price. Is that sustainable or are you going to concentrate more on emphasising quality, particularly when you start targeting the US and Europe?
People say that ZTE s success in the region is just because of the low cost. I don t agree with this. In the region, some countries are not very rich but they focus firstly on the technology and the quality. They don t care about the price until after the technology and quality.

US and European markets are very different to those in this region. Telecoms penetration is very high and people are interested in new technologies. Operators also have different requirements in terms of functionality. In those regions, you need to modify products to satisfy their special requirements. Operators in developed countries care about long-term cooperation. They consider up to ten years of cooperation so they need more time to discuss, prepare and do evaluation. You also need to set up strong local support teams.

Are you now looking to increase your focus on the strategic regional operators in Africa?
We have had successful GSM projects in big countries but we still hope to cooperate with the giant operators like MTN, Celtel and Orascom. They are more aggressive and stronger because they want to cover the whole region. We hope to get closer to them, which can make our GSM operations more of a success.

The other thing is that CDMA wireless local loop is gradually becoming more popular, in countries such as Nigeria, Algeria and Kenya. It is the best choice for fixed operators, so this is a hot area for us. We have signed a partnership with Qualcomm and are also the largest supplier for China Unicom. We are not only supplying the network equipment but also handsets, so we have an end-to-end solution. CDMA has better coverage [than other wireless local loop systems] and has much better data functionality.

Have you any plans to position it in the mobile sector against GSM?
ZTE has a strategic partnership with Qualcomm, which is very actively promoting CDMA. Most of the [contracts] have been in wireless local loop, but not so many have been in mobile. But in some countries they may use CDMA for mobility but only within one city, where you cannot roam to another city.

Is it in your strategy to start promoting 3G infrastructure abroad in the short to medium term?
Most people are talking about UMTS but 3G has other standards like CDMA 2000. For UMTS, we have some pilot systems [operating] with China Telecom and China Netcom. We are also discussing cooperation with some other operators and hope to have some commercial contracts with operators outside China shortly.

Are any of your customers in Africa looking to add mobility to their CDMA networks?
Most operators are still using CDMA 2000 1x but some of them are interested in EVDO. We are hoping to set up some commercial pilots.

Have you any plans to start selling mobile handsets in Africa?
ZTE started making handsets about four years ago but until now are still focused on the market in China. This year, ZTE is hoping to produce and sell ten million handsets but most of these will still sell in China. This year, we hope to sell two million handsets in overseas markets, and we are focusing on big countries in Latin America, and Indonesia. We have sold some GSM handsets in Africa but not in large [shipments] maybe about 10,000. We are also selling fixed and CDMA handsets. We are hoping to promote handsets in the region but are still trying to find a proper strategy to do so. We are still studying how to push handsets so may need to find a partner.