China firms to pay $1.4 billion for networking gear

The biggest spender was China Unicom, one of the largest communications companies in the world. As part of plans to upgrade and expand the reach of its cell phone network, it signed a $556 million equipment supply deal with Motorola's Global Telecom Solutions Sector and placed an order worth an undisclosed amount with Lucent. The Chinese carrier also awarded a separate contract to Lucent and Juniper Networks for gear to expand and improve its wireline network.

Motorola's beleaguered telecommunications network equipment division emerged as a big winner in contract announcements, made by Chinese carriers on Tuesday. In addition to the China Unicom deal, the Schaumburg, Ill., company received a $510 million order for cellular network gear from China Mobile, the world's largest cell phone service provider, which is expanding its Global System for Mobile Communications (GSM) network.

The last few years have not been kind to U.S. telephone network equipment providers, which were already taking hits from a hypercompetitive market and a shrinkage in orders when the overall economy began to droop in the late 1990s. However, the Chinese orders are the latest indication that telephone network operators are ready to increase their spending. In December, for example, Cisco Systems CEO John Chambers' gave an upbeat assessment of information technology spending. In addition, Verizon Communications recently announced that it will spend $3 billion on network improvements in the next two years.

Lucent Technologies won a total of $350 million in contracts from China Unicom and China Telecom, the company said. Further financial terms of the deals were not provided. Cisco Systems has also agreed to supply network equipment to the two carriers, said a company representative, who declined to disclose financial details.

In addition, China Unicom ordered $93 million in network gear from Ericsson, according to the Swedish company.

Overall, Chinese companies announced a total of $2.3 billion in orders on Tuesday for both telecommunications and computer equipment. U.S. Commerce Secretary Don Evans said during a public signing ceremony held in Washington, D.C., that although trade relations between the two nations have been strained lately by China's estimated $125 billion trade surplus with the United States in 2003, the $2.3 billion in orders is "another clear demonstration of the growing economic and trade relationships between the United States and China."

Network equipment providers have high expectations for China. That's partly because a vast majority of its citizens don't own a handheld, even though its cell phone population is now the world's largest. Telecommunications networks are spreading beyond major urban centers, providing more opportunities for providers of wireless and wireline services and equipment.