ZTE targets 50pc rise in phone sales to boost earnings

Mainland telecoms company hopes to sell 50pc more handsets to improve profit margins

PUBLISHED : Thursday, 31 January, 2013, 12:00am
UPDATED : Thursday, 31 January, 2013, 5:20am

ZTE, the mainland's second-largest manufacturer of telecommunications equipment, plans to sell 50 per cent more smartphones this year, with a focus on high-end handsets to improve profit margins.

Last year, the company shipped 65 million handsets, among which smartphones had more than doubled to 35 million units from 15.8 million in 2011.

It expects to ship more than 50 million smartphones this year, or 70 per cent of total sales, according to Lv Qianhao, the head of handset strategy.

"It is more important for us to improve profitability at this stage," Lv said.

The Shenzhen company reported a net loss of 1.95 billion yuan (HK$2.43 billion) in the third quarter, citing delays in overseas projects and low-margin contracts. It was the first quarterly loss since the firm listed in Hong Kong in 2004.

On January 20, ZTE said in preliminary results it could have lost between 2.5 billion yuan and 2.9 billion yuan last year. It posted net income of 2.06 billion yuan in 2011.

In the preliminary report, it said it might return to profit this quarter, partly because the disposal of shares in Shenzhen ZNV Technology could generate investment income of up to 880 million yuan.

ZTE hopes the growth in smartphone sales in developed markets, including the United States and Europe, will help it return to profitability this year.

Spokesman David Dai Shu said the company showed momentum in the US last year by gaining a share of nearly 5 per cent of the smartphone market.

"The revenue of terminal sales in the US topped US$1 billion last year, compared with US$400 million in 2011," Dai said.

ZTE has said it intends to grab as much as 10 per cent of the US handset market by 2015.

Mainland makers of mobile devices, including Huawei, have been seeking expansion in the US but many of their attempts at acquisitions or mergers in that market failed.

Efforts to win certain infrastructure contracts were also blocked, on the grounds of security risk.

But Dai said the smartphone business was not affected by the opposition to the deals, which are related to network infrastructure.