China Telecom (NYSE: CHA; 0728.HK) has recently opened bidding for IPTV set-top box (STB) procurement contracts. The contracts are for 2.83 mln SD STBs and 880,000 HD STBs.

18-20 manufacturers are taking part in the bidding, the majority of which participated in and passed an IPTV STB testing program organized by China Telecom in the second half of last year.

China Telecom has previously launched two bidding rounds for IPTV terminal procurement contracts, one in 2008 and one in 2009. In 2008, 12 manufacturers participated, with an average price per STB of RMB 497. 16 manufacturers participated in 2009, with an average STB price of RMB 338, of which the highest price was RMB 388 and the lowest was RMB 285. Procurement contract bidding for IPTV STBs puts China Telecom in a very strong bargaining position, and one industry insider estimates that this round of bidding will usher in a new low price for ITPV STBs, significantly reducing IPTV STB manufacturers' profit margins.

China Telecom currently has more than 9 mln IPTV users.

Source:marbridgeconsulting