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Operators "are now saying even a $25 mobile phone is too expensive"

Chinese handset maker ZTE has not only done a deal to supply phones to Vodafone, but has also signed up to build them for Telefonica's Movistar.

Following the announcements, Reuters has quoted CSS Insight: "Even at $25 or $30 per phone, the operators believe there's a premium associated with the Nokia and Motorola brand. So, they're getting ZTE in," said analyst Ben Wood.

Today at 3GSM in Barcelona, Telefónica España and ZTE announced an agreement "to jointly manufacture and distribute 3G mobile handsets for the Spanish market." The new ZTE phones will be launched by Movistar during 2007 and "will boast the latest technology and features at a highly competitive price," said the announcement.

Telefónica and ZTE will form a joint team to work on the development projects and an independent team will be formed to develop ZTE products in Spain. The first product of the collaboration will be a 3G phone, called the F230, developed for Movistar by ZTE.

Shiyou He, Senior Vice President of ZTE, said: "From a geographical and economic point of view, Spain is a key market for ZTE. Therefore, an agreement with the leader in that market - Telefónica - is an ideal opportunity to show our technological expertise in the development of new 3G handsets."

According to Reuters, the cheapest phone currently on the market is the Motorola C113a, specifically designed for emerging markets, "which could be bought for 18.23 euros ($23.92) on the January wholesale spot market, according to data provided by gsmExchange. The ZTE products may cost several euros less," concluded Lucas van Grinsven, European Technology Correspondent.