The new head of ZTE, Shi Lirong, believes the industry is
recognising the potential of China’s home-grown
versions of 3G and 4G technology, which will be in demand as
operators struggle to supply mobile broadband services
Shi Lirong: innovative software-defined radio is a unified
platform for 2G, 3G and 4G LTE
The new president and CEO of ZTE is enthusiastic about the
future of China’s home-grown version of 3G mobile
technology — and its LTE upgrade — as a way
of tackling the huge strain that data services are putting on
Shi Lirong, the 46-year-old telecommunications engineer who
took over at the top of ZTE at the end of March 2010, believes
that many of the 500 operators that already have time-division
duplex spectrum will consider migrating to the TD version of
"The technology can bring new value to operators," says Shi, in
an exclusive interview with Global Telecoms Business. TDD
spectrum is valuable "and the TDD spectrum is cheaper", he
Some operators are already deploying the more usual
frequency-division duplex version of 3G and then LTE, but, says
Shi, "because of spectrum limitations they are considering TDD
spectrum for their data services."
China Mobile pioneered TD SCDMA, a TDD version of 3G technology
that was invented in China. When Chinese telecoms operators
were reorganised in 2008, each of the three companies was
allocated a different 3G technology: China Unicom got
conventional WCDMA, as used in most of the world.
The Chinese government told China Telecom to use the Qualcomm
version of 3G, and China Mobile — the biggest operator
in the world — was allocated TD SCDMA.
There was some cost to China Mobile, as the then CEO, Wang Jianzhou, told Global Telecoms
Business in 2009: TD SCDMA did not have the volume
advantages that would drive cost down.
But the sense of the industry appears to be shifting in favour
of TDD, as customers around the world start to use mobile
broadband at levels few ever expected.
And the attraction of TDD is that it is efficient for data,
which tends to flow unequally upstream and downstream. The
system can dynamically adjust the timeslots for each direction,
freeing space for other users.
"There are lots of new opportunities" with TDD, says Shi, who
was in charge of ZTE’s sales and business
development operations for 11 years until his promotion earlier
this year. He started out as an engineer, with a
master’s degree in telecommunication and
electronic system engineering as well as a
master’s degree in engineering.
Focused on innovation
Is it engineering that excites him, or the prospects of sales
for ZTE? Both, it seems. "We are more innovation focused: we
can bring propositions to our partner operators," he says,
neatly straddling both.
"Our innovation is oriented to market needs and oriented to the
needs of our customers," he says. "We believe in the future if
ZTE wants to lead the telecoms industry. This strategy is the
number one priority."
But he swiftly moves on to his second priority for his
leadership of the company: market share. "Currently more and
more operators know that ZTE has good technology and good total
cost of ownership, and we can deliver," he says. The company
can execute on the projects on which it works, he says. "We
have very competitive products now, so we hope we can grow more
This is the result of high spending on research and
development, he says: consistently about 10% of turnover,
Revenue was $4.5 billion in the six months ending June 30 2010,
according to the company’s results published in
August, and was increasing by more than 10% a year. Profit in
the first half was $129 million, a rise of 12% year on year.
That means that annual spending on R&D is getting close to
$1 billion. "We have a huge R&D investment," says Shi. "We
can develop lots of innovative products."
About 10% of that R&D spend is on forward-looking research,
he notes — on projects such as next generation
base-stations and network.
ZTE has a patent portfolio of over 30,000 patents in China and
4,100 patents overseas, covering 2G, 3G and 4G, including what
it says are "essential patents" in LTE and UMTS. In 2009, ZTE
says it ranked number one in patent applications in China, and
it tripled the number of international patent applications.
One result of this investment has been the
company’s software-defined radio equipment, says
This is a system that allows an operator to hedge its bets on
when demand for 3G will start to overtake the need for 2G base
stations — and when, in turn, it will need to ramp up
4G services. The answer, according to ZTE, is to install a
single standard of hardware and put the difference in the
"It’s a unified platform for 2G, 3G and 4G LTE,"
he says. "We are the first company to develop and deliver this
software-defined radio equipment."
CSL, Telstra’s mobile
business in Hong Kong — conveniently just a few
kilometres from ZTE’s headquarters in Shenzhen in
southern China — is an enthusiastic user of the vendor’s SDR, but
there are others, says Shi, listing South African operator
Cell-C, Portugal’s Sonaecom and KPN of the
SDR is even more flexible than just providing the ability to
move through the GSM family of technologies. "We can even
combine CDMA, WiMax and TD-SCDMA in the same platform," smiles
Shi. So, if a WiMax operator wanted to do so, it could consider
a move to the TDD version of 3G — an intriguing
The company makes WiMax systems, which are also TDD: it has,
for example, supplied Telefónica with equipment for one
of the first WiMax networks in Spain.
"More and more people are considering the TDD spectrum, as FDD
can be very limited and expensive," says Shi. "With more data
focus and broadband focus, operators need more spectrum
resources, so people are considering TDD for wireless
When the reorganisation of China’s
telecoms operators was completed in 2008, it had taken a
long time to sort out, leaving all three some way to catch up
with the rest of the world in 3G operations. But that meant
they all invested heavily and quickly in 3G — and ZTE
was a huge beneficiary.
"We got the number one market position in Chinese 3G, mainly
because ZTE is more competitive in technology and total cost of
ownership," says Shi.
It is competing in China with all four of its international
rivals: Huawei is Chinese; Alcatel-Lucent has its own Chinese
subsidiary, Shanghai Bell; and both Ericsson and Nokia Siemens
Networks have a significant presence in China.
"There are five vendors and all five vendors compete," says
Shi. But ZTE claims to have won the five-way battle in terms of
market share. "The three operators all assessed the network
quality and ZTE’s performance is the best with the
three operators," he says. Best on what basis? "For example
China Unicom calculates factors such as power consumption and
This success in the first 3G investment phase "gave us a volume
advantage and therefore we became more cost effective and more
experienced in 3G", he adds. "So we will get more chances in
the second phase and the third phase."
That’s given ZTE a good market share in its
homeland, and no doubt helped with volume efficiencies
worldwide. "In Asia Pacific our market share is high," says
Shi. And he has his eye on other parts of the world: "I hope in
the near future in big countries — Brazil, Russia,
South Africa, Nigeria — we will get higher market
In the developed world, ZTE has had a number of successes, but
it’s probably fair to say that the company has not
achieved the same sort of market share as it has in the Asia
Pacific region and other emerging markets. "In Europe and North
America there is big potential," Shi accepts.
Politics possibly plays a part. Both ZTE and its Chinese rival
Huawei — and they are fierce rivals — have
had political opposition in the US, but Shi is quick to respond
that ZTE is a public company, with shares quoted on two stock
"We are a listed company, not only in Shenzhen but also in the
Hong Kong region," he says. "Everything is very strict, as we
follow Hong Kong regulations. It’s more
transparent and more regulated."
Around 21% of ZTE’s shares are foreign owned, he
adds, and in 2010 the company appointed an American as an
independent board member. This is Timothy Seifert, a former
Freshfields lawyer who is general counsel of Alibaba, a Chinese
online trading company. "We are quite confident that ZTE is a
very different Chinese company," says Shi.
"China has also changed, like ZTE has changed from a small
company to a big company. Our thinking has also changed
— that’s very important," he adds.
So in the US, ZTE has started slowly. "The ZTE corporate motto
is 'step by step’," he notes — though a
more formal corporate slogan is "bringing you closer".
It has started its approach in the US with handsets and
terminals. It was two years’ hard work, he notes,
but "that was the right strategy", which appears to have paid
off. "Now the main operators are choosing ZTE for the devices,"
he says. "We have delivered handsets to Verizon."
In the longer term ZTE’s ambition is "to provide
an affordable smartphone", says Shi. "The smartphone is still
priced too highly. People are asking what will be next after
Apple. I think ZTE can provide this."
But meanwhile the next step in the step by step approach to the
US market is "to approach the networks", he continues. "We have
some successful middle and small operators. Next step, we hope
we can get into tier one operators."
Tier one customers
Tier one is the clear goal. "Our strategy is focused on the big
countries and the big operators, multinational operators like
MTN, Bharti, Vodafone, France Telecom," he says. "We are more
focused on those operators."
The company is "very careful" when dealing with smaller
operators — and, he added, "in India we are very
careful because there will be consolidation". There are many
operators fighting for market share in India: see here.
ZTE doesn’t completely avoid small companies,
though. In June 2010 the company signed a deal with a small
Canadian start-up operator, Public Mobile, to design, build and
operate an end-to-end CDMA network which includes wireless,
core network, service platforms and IP architecture. ZTE will
also deploy over 1,000 base stations for the network.
That deal, said at the time to be worth $350 million, was
funded by the Export-Import Bank of China. "When you provide
the equipment and the technical solution, sometimes we provide
a package of financial facilities," says Shi. "This can bring
value for operators. We have lots of different financial
partners — Chinese and European banks."
A financial package is not standard, but "sometimes we can
provide a package if the operator needs it", he notes.
Customers "also have their own channels" for finance and "they
evaluate the financial costs", but "if we can provide this we
like to do so. It’s an option for our operators."
He adds: "We are a listed company and we have very strict
regulations on risk control."
The design, build and operator part of that Canadian contract
is intriguing too. Managed services are "a very important
strategy for ZTE", says Shi. "We don’t announce
very much about it, but we have already provided services in
The company has "2,000 people providing managed services in
different countries over the last three or four years", he
adds. "We employ some very professional people."
Shi lists MTS in India — the joint venture between
Shyam of India and Sistema of Russia — as well as
another Indian company, Idea Cellular, and Cell-C in South
Africa as managed services customers. "We believe we can see a
very high potential in this area, with more and more networks,"
ZTE’s contracts are "mainly greenfield, where we
have built the network, but some we take over, along with the
existing operational staff", he notes.
Meanwhile, ZTE is as focused as most other vendors on trimming
costs. The company wants "to optimise our internal management",
he says: "Cost saving is also very important." He means
internal cost saving, by optimising its structure. ZTE has to
"reorganise our structure to be more flat and more effective".
That means he will be setting "clear goals" for different
departments in the company, and assessing their performance. He
wants to save money on travel by making more use of IT and
telecoms. "Globally we have 400-500 videoconference terminals.
We don’t need to travel."
Where next? The "bringing you closer" slogan Shi mentioned
earlier is intended to reflect ZTE’s "corporate
high concern for humanity, the company’s global
vision and insight, the value of dedication to the development
of the communications industry". Top issues include "corporate
social responsibility, green technology, carbon reduction,
solar powered handsets and green technology for our customers",
"We need to bring ZTE propositions to the operators, to the
people, to the community. That’s very important.
With R&D, technology, products, service, we hope we can
contribute to the community. That’s very
GTB interview with Wie Zaisheng, CFO of ZTE
ZTE supplies CSL in Hong Kong and this
GTB interview with China Mobile CEO Wang
ZTE and Huawei political position in India