ZTE notches first US Tier I handset deal with Verizon

ZTE has won its first phone deal with a Tier I US operator. Verizon Wireless (NYSE:VZ, NYSE:VOD) today unveiled the Salute, an entry level feature phone, which may have a low price but represents an enormous value to the Chinese vendor that has fought for years to break into the US handset market.

“We’re very excited and proud of this major step for ZTE,” said Jeff Ji, executive vice president of ZTE USA. “We’re trying to dramatically increase the US market. We hope this will be the first of many deals with Tier I operators as we launch a wider range of devices.”

News of the ZTE-built phone leaked last week as the device appeared on Internet retailer Wirefly.com, though the device officially went on sale today. Costing $20.00 after rebate and contract, the device is intended to be an entry-level device. ZTE is positioning it as “an upgrade to the basic phone,” Ji said. The sleek, slider style design is a step up from the usual candy-bar block design of entry-level phones, and it has some key feature phone capabilities such as 1.3 Megapixel camera, Bluetooth, mobile Web browser, e-mail and social networking clients and support for Verizon’s BREW story and VZ Navigator (though without GPS).

ZTE has struggled to break into the US infrastructure and handset market, landing a few smaller deals with regional operators, but until the Salute, failing to make the big score. Before its deal with Verizon Wireless, ZTE’s biggest customer was MetroPCS (NYSE:PCS), which is using ZTE’s dual-band PCS-advanced wireless service (AWS) phones to bridge its two CDMA footprints.

The Verizon win could prove ZTE with a secure foothold in the US, though. Typically ZTE and other Chinese vendors like Huawei first enter western markets with a low-end carrier-branded handset, like the VZW Salute, and then begin scaling their devices upwards. Last year, ZTE said it would make a big push in the North American smartphone market, and Ji said that the Salute—while hardly a smartphone—fits in with that strategy.

The handset proves ZTE can make a device with feature phone qualities at a basic phone price. “The smartphone doesn’t have to be high-end,” Ji said. “It can be mid-tier, or can be low-end, which would make it accessible to the mass market.”

Most critically, though, the Verizon deal gives ZTE momentum and credibility among the major US operators. Ji won’t go as far to say that the second Tier I deal is easier to make than the first, but he did say that ZTE has gotten a lot more interest from other US national providers. “I can only say that ZTE is working with all of the Tier I operators,” Ji said. “We hope to have some more good news in the near-term.”