The company's stronghold in the Chinese broadband market is in DSL (digital subscriber line), which uses existing copper telephone lines to transmit data at rates of up to 1.5 Mbps (1.5 Megabytes per second).

After a slow start in late 1998, DSL has become the most popular option among the mainland's small and medium-sized enterprises.

"It got off to a bit of a slow start because initially China Telecom was a bit reluctant. China Telecom did not really want to cannibalise its initial investments on ISDN lines, ISDN networks," said Renee Gamble, market analyst at International Data Corp (IDC).

China Telecom, which owns most of the mainland's copper line networks, is the only broadband service provider offering DSL services.

In March, the French telecoms giant signed an agreement with China Telecom to sell equipment for DSL, which includes preferential treatment for Alcatel.

It is believed Alcatel offers flexible payment options which suit China Telecom's preferences in terms of when payments are made.

Ms Gable said Alcatel's size gave the firm flexibility in managing billings. And for Alcatel, it was worth it.

"The China market today is at the phase where it is entering exponential growth," Alcatel's vice-president of marketing, Etienne Charlier, said.

The number of DSL subscribers in China is expected to grow by 571 percent this year from 247,000 subscribers last year, according to figures from independent research firm IDC.

But Alcatel's strength in the DSL segment may be threatened by rival technologies which are quickly catching up.

By the end of last year, its technology accounted for 50 percent of the broadband market, while the rival cable-modem technology held 42 percent.

(21dnn 08/13/2001)