ZTE to sell video monitoring unit for 1.3b yuan

PUBLISHED : Saturday, 29 December, 2012, 12:00am
UPDATED : Saturday, 29 December, 2012, 4:58am

ZTE Corp, China's second-largest telecommunications equipment maker, plans to sell an 81 per cent stake in its surveillance equipment subsidiary for 1.3 billion yuan (HK$1.6 billion).

The subsidiary is Shenzhen ZNV Technology, ZTE said in a filing to the Hong Kong stock exchange after the market closed yesterday.

The stake sale will result in a net gain of up to 880 million yuan for the company, which reported a net loss of 1.95 billion yuan in the third quarter.

"It's not a decision made under the pressure of third-quarter losses," a senior staff member said on condition of anonymity. "According to my knowledge, ZTE has been preparing to sell off ZNV for a long time."

The third-quarter result was the company's first quarterly loss since listing in Hong Kong in 2004.

Shares of the Shenzhen-based company closed at HK$13 yesterday against HK$24.90 at the beginning of this year.

The proceeds from the disposal will be used as working capital "to support the development of the company's main business", ZTE said in the filing.

The source said selling a profit-making subsidiary for a good price will enable ZTE to better focus on its main business - namely broadband, cloud computing and smartphones.

"ZNV, which makes video monitoring equipment, is in good shape, but selling it is in line with ZTE's long-term development strategy," he said.

Independent industry analyst Xiang Ligang said ZTE's problem is that it has been working on too many things at the same time. "The burden is too heavy," Xiang said.

For a company of ZTE's size, an 880 million yuan deal is nothing, according to Xiang. "But it is still cash and for a loss-making company, this is a reasonable move. Besides, it will allow ZTE to put all its resources on its core business."

Data from technology research firm IDC shows ZTE ranked No4 among top smartphone vendors globally, after Samsung Electronics, Apple and Research In Motion, with a market share of 7.5 per cent.

The company has been trying to expand into the high-end smartphone market, which is mostly occupied by Apple and Samsung.

It expects to ship 50 million smartphones next year, from 35 million this year.