British Firm Agrees Deal To Equip China's Army With Radios
China's three million-strong People's Liberation Army (PLA) is poised to adopt a next-generation digital radio system designed by a British group listed on London's junior AIM market.

Software Radio Technology (SRT) recently signed licensing agreements for its radio hand-set designs with three state-owned manufacturers linked to the Chinese military and police forces: TCB, Hisense and HYT.

The deal is limited to home security use, SRT said, but gives the group access to the PLA's massive budget. Chinese military expenditure is officially put at $45 billion (£22.5 billion) a year, but some estimates suggest twice that.

The first sets based on SRT's technology template have been placed in the hands of the Chinese Air Force, the group said. Mass manufacture for the military will begin in China in the coming weeks.

SRT will receive a $30 licence fee per set and an initial fixed fee of more than $1.2 million from each manufacturer.

China is rolling out a network of radio base stations capable of supporting the five million members of its military and police forces. Demand for SRT-enabled handsets could reach one million a year, the group has estimated.

The devices work on the Tetra standard adopted by emergency services and armies in 85 countries, including Britain. To guard against China's rampant piracy, SRT's fees will be secured against a key proprietary component that it will manufacture in Europe and supply to the Chinese. It claims that the part is too complex to copy efficiently and that without it the handsets are "nothing but junk".

Analysts said that the deal could be the "tipping point" for SRT. The group was spun out of Securicor in 2002, when a buyout team paid £535,000 for it. The company is now valued at about £37 million.

SRT has dismissed concerns that supplying the PLA, albeit indirectly, could raise problems in its dealings with the United States, where the export of military technology to China is a sensitive political issue. The group is also pinning hopes on its marine radio system being made mandatory by the US Coast Guard, potentially opening up a second multimillion-dollar market.

Simon Tucker, the managing director, said: "This is not a system that is going to be used to attack Taiwan. China is a country of 1.3 billion people, with growing social unrest internally and it is investing billions to counter that." He added that SRT's dealings with China have been approved by the British Government and that the US military uses a different radio standard. Different countries' Tetra systems are also designed to be incompatible.

This year SRT's value fell sharply when trials revealed teething troubles with its Tetra technology. It says that those problems have been solved and that its system is ready for active service.