XG Tech signs deal with Telefonica Mexico

By Chris Wills

LONDON, March 28 (Reuters) - U.S.-based xG Technology Inc. (XGT.L), which is developing a low-cost 4G telecom network, said on Wednesday it had signed a deal to develop its technology with Telefonica Mexico, boosting shares in the UK-listed company.

Shares in wireless broadband firm xG, which hopes to have a 4G network in parts of the United States early next year, rose over 3 percent on the deal, but some of the value was already built in after an earlier Reuters story, a dealer said.

XG shares have risen 13 percent since Reuters reported on March 23 that a deal with a telecoms firm in central America was soon to be announced, citing sources familiar with the situation.

XG said Telefonica Mexico, which is part of Spanish telecoms group Telefonica (TEF.MC) and whose wireless arm is called Pegaso, would evaluate and test xG's base station technology with a view to developing a network following the exclusive territory deal.

Its xMax technology allows voice and broadband Internet to be transmitted over wider areas and at cheaper cost than existing 3G technology, the company says. The fourth generation or 4G version of its offering should allow high-quality video.

XG shares have more than tripled since it floated last November and it is now valued at around $1.84 billion.

"Today's announcement is further indication that the subtle strategy put in place by xG Chairman and CEO Rick Mooers is beginning to pay off in taking this technology from a theoretical invention to a commercial reality," said xG's Head of Sales Frank Peake.

Sources familiar with the situation also told Reuters on March 23 that a deal with a Canadian telecoms company could also be expected in the near future.

Shares in xG, which floated at $4.50 last November, climbed 3.4 percent to $15.25 by 1039 GMT.