Weida Communications (WDAC.OB) has entered into an agreement under which China Telecom will lease Weida satellite links and equipment for China Petro's West-East Natural Gas Transportation project.
The contract, which was signed last week, represents the first phase of the project, which is to be implemented in three steps. The first step covers the project pipeline, the second covers refineries and depots and the third covers retail gas stations.
The number of terminals to be leased in the first phase will be small, and therefore initial revenues from this phase for Weida will not be substantial. However, this project when all phases are completed will potentially deploy in excess of 15,000 terminals nationally by 2007.
The equipment used in the project will be leased to China Telecom and remain owned by Weida Communications. In exchange, Weida will receive a monthly leasing fee and a communication service fee for each terminal.
"The West-East Natural Gas Transportation Project is a significant opportunity for Weida Communications," said Mitchell Sepaniak. "It represents the official launch of Weida's Cooperation Framework with China Telecom, and is also a key component in the economic development and social stability of Xinjiang Province. Weida is providing the satellite communications tools for the construction of the main energy line connecting western and eastern China."
China Telecom's contracts are all signed on a year-by-year basis. However, the West-East Natural Gas Transportation project is designed as a 20-year project.