ZTE burns cash in bid to crack US, Europe markets
ZTE Corp, the mainland's largest listed telecommunications equipment vendor, has said it will continue to focus on overseas sales this year, making further inroads into developed markets even if it means bleeding cash.
'This year we will focus more on the European and North American markets. We hope to make some announcements soon about certain contracts with a US customer,' said president Yin Yimin yesterday.
He was speaking after ZTE reported fairly flat profit and revenue growth last year. Net profit rose just 1.2 per cent to 1.28 billion yuan from 1.27 billion yuan a year earlier, while revenue edged up 1.67 per cent to 21.57 billion yuan.
The firm recorded a negative operating cash flow of 285.9 million yuan, from a cash in-flow of 1.24 billion yuan in 2004. Mr Yin said it was burning cash because of the need to expand overseas.
Although ZTE did not provide a breakdown of overseas contributions from more than 60 countries - mainly from emerging markets in Africa and Southeast Asia - it said it paid 56 per cent more taxes last year due to foreign expansion.
'Our growth driver for this year will still be from overseas markets,' insisted Mr Yin, adding: 'We had improved margins for our handsets business because we sold them overseas.'
ZTE landed several deals with regional telecommunications players last year, becoming Hutchison Whampoa's handset supplier in its European 3G markets. It also clinched a deal with France Telecom to provide corporate telecommunications systems. Its international sales grew 68.3 per cent to 7.7 billion yuan from 4.58 billion yuan a year earlier.
The contribution of mainland sales to ZTE's total revenue dropped to 64.3 per cent, from 78.5 per cent.
Mr Yin said that for this year, the company had not included any sales forecast for 3G telecommunications gear in its overall planning.
'We are participating in the field trial of a TD-SCDMA network in two cities. We expect that in the future, operators would likely spend some 10 billion yuan on building a network,' said Mr Yin.