The $1 billion contract with China Mobile includes products and solutions to expand the company’s networks in 18 Chinese provinces while that with China Unicom, valued at $700 million, is for the upgrade of the operator’s GSM networks in 10 provinces and for the provision of GSM/WCDMA networks and wireless access system in 15 provinces.

Generally, the deal is expected to help improve the capacity on older networks based on the second-generation technology as well as to help speed up installation of newer 3G networks.

Mats Olsson, the Stockholm-based equipment vendor’s president for Greater China, told Dow Jones Newswires that the value of the deals is roughly equivalent to Ericsson’s entire sales in the country during 2008, adding that “this reflects the growth we feel in China.”

3G mobile phone business licenses were awarded by the government to Chinese telecom operators around January this year. Foreign equipment manufacturers and suppliers like Ericsson and Alctatel-Lucent (ALU) have since then been fighting for market share in the country, hoping that the high growth in China would compensate for the lower growth on other markets.

Olsson described the composition of Wednesday’s deals as favorable, noting that the Chinese operators have been quick to adopt 3G technology since the licenses were awarded.

Ericsson has already started delivery under the framework agreements, which will run for “a good part” of the remainder of the current year, he added.

Analyst Pierre Ferragu at Bernstein said that with the deal, the equipment maker’s sales in China is expected to grow 12% in 2009, and added that following Wednesday’s agreements “the chances for Ericsson to deliver even better growth in China than what we expect are now very high.”

Ericsson says the two operators have more than 620 million mobile subscribers in China.

Source : Konaxis