ITI Ltd, the largest public sector telecom behemoth, has entered into a strategic alliance with ZTE Corporation, the $2-billion Chinese telecom leader, for the transfer of Code Division Multiple Access technology and manufacture of its equipment in Bangalore.

The CDMA technology will be supplied to leading mobile operators such as Bharat Sanchar Nigam Ltd and Mahanagar Telecom Nigam Ltd, besides private service providers through competitive bidding.

In the run-up to formalising the license agreement, ITI has already supplied 150,000 lines of ZTE's CDMA 2000-1X equipment to BSNL, valued at Rs 78 crore (Rs 780 million) under technical collaboration.

The pilot project was executed under a memorandum of understanding signed between the two partners since August last, as BSNL's preferred supplier.

During the current fiscal year (2003-04), ITI is targetting to supply 200,000-250,000 lines of equipment to BSNL and MTNL, which will constitute about 30 per cent of their total requirement in the wireless in local loop segment.

"We have bid for two tenders of BSNL and MTNL (one each) for supplying the CDMA equipment during this year, using the existing assembly lines for manufacturing them," ITI chairman and managing director Y K Pandey told the media in Bangalore on Tuesday.

The value of the first tender is about Rs 800 crore (Rs 8 billion) and the second is Rs 745 crore (Rs 7.45 billion).

"With the technology in place, including testing equipment, ITI will bid for all future tenders of the public and private operators to capture a significant share of the growing CDMA market," Pandey stated.

ITI is making an initial investment of Rs 1 crore (Rs 10 million) for augmenting its existing infrastructure to enter the CDMA technology.

The technology partnership with ZTE involves the manufacture of 10 printed circuit boards of the equipment, down payment of $1 million for technology transfer and royalty payment at the rate of 5 per cent per line sold to the operators.

The CDMA technology involves PCBs, mechanical parts and customised software. Each of its switches will have capacity to provide 10,000-40,000 connections (lines) to subcribers through WLL.

According to ZTE vice-president Joe F Zhou, the company's CDMA 2000-1X system provides operators the latest mobile features such as multimedia services, e-mail facilities and clear voice.

"CDMA has several secured advantages over its GSM counterpart. Apart from cost-effectiveness in manufacturing the equipment, the technology provides clear voice to customers with high secrecy and low radiation," Zhou affirmed.

The Shenzen-based ZTE is engaged in designing, developing, manufacturing and marketing a wide range of telecom products, with presence in 40 countries the world over. The Chinese government has a majority holding in the Beijing stock exchange listed company.

ITI has also bagged an order from MTNL to supply 180,000 CDMA handsets of Hyundai make, valued at Rs 88 crore (Rs 880 million). "The handsets are being customised in collaboration with a local vendor to meet the specific requirements of its customers," Pandey disclosed.

Though GSM operators are ahead of its CDMA rivals currently in subscriber base, the overall cost advantage of the latter and its superior quality will enable WLL operators like BSNL and MTNL to provide competitive service to their existing and potential customers.

Incidentally, ITI has started providing GSM (global system for mobile communication) infrastructure to BSNL and MTNL's over the year. In the first phase, it has supplied 260,000 lines in Mumbai and Delhi.

"We have received an order for the second phase of their cellular mobile roll out involving 250,000 lines. The order covers the entire western zone of India, comprising Maharashtra, Gujarat, Madhya Pradesh, and Chattisgarh," Pandey added.

With this, MTNL and BSNL will be equipped and networked by ITI for providing cellular services to one million new subscribers. The subscribers will also be beneficiaries of 32kbs SIM cards manufactured by ITI.