CK Hutchison Holdings Ltd and VimpelCom Ltd selected Chinese supplier ZTE Corp to merge and manage their Italian mobile networks in a blow to Ericsson AB, which has business with both carriers.

"We want Italy to become ZTE's Europe hub," the company's head of Europe, Xiao Ming, said in an emailed statement. ZTE also plans to create "thousands of new jobs" in Italy, increasing the skills of its technicians and expanding the number of staff involved in related industries, Ming added.

The contract is valued at about $1 billion, people familiar with the matter said last week. ZTE won the business in competition with Huawei Technologies Co, Ericsson and Nokia Oyj, they added. Ericsson currently manages Hutchison's network and part of VimpelCom's, according to one of the people.

The deal gives ZTE, based in Shenzhen, a boost as it tries to scale up its European operations. Hutchison's 3 Italia and VimpelCom's Wind Telecomunicazioni SpA received European Union approval in September for their merger, which will create Italy's largest mobile-phone network. Italy is the second-largest market for Hutchison, led by billionaire Chairman Li Ka-shing, behind the UK.

The loss of a big services contract in Italy puts further pressure on Ericsson's incoming CEO Borje Ekholm, who will take the helm next month after spending a decade on the Stockholm-based company's board. Ekholm has been tasked with reviving Ericsson's fortunes after a year in which it has ousted one CEO as it struggles to adapt to lower regional demand for phone networks.

Ericsson declined to comment and referred questions on the results of the tender to the carriers.

The merged company, which will take on rivals Telecom Italia SpA and Vodafone Group Plc's local unit, chose ZTE based on technology more than on price, the people said.