New | ZTE to step up 4G network sales in second half as its interim profit, revenue surge
Telecommunications equipment maker expects 4G projects to support sales after firm posts surge in first-half net profit and revenue
ZTE Corp, China's largest-listed telecommunications equipment manufacturer, expects a steady stream of 4G mobile network projects in the second half of this year to buttress its sales amid slower demand for smartphones in the country.
"Large-scale deployment, capacity expansion, performance optimisation, and in-depth coverage of 4G networks will drive new demand for investments in the telecommunications industry," ZTE chairman Hou Weigui said in a regulatory filing on Wednesday that reported a 43 per cent year-on-year increase in the company's interim net profit.
Shenzhen-based ZTE and rival Huawei Technologies have won the bulk of 4G network equipment supply contracts from China Mobile, China Unicom and China Telecom.
China boasts the world's biggest 4G network coverage, with China Mobile alone having 189.66 million 4G subscribers at the end of June.
"Management has indicated that ZTE's wireless [network equipment] sales are expected to grow 15 per cent year on year in 2015," Jefferies equity analyst Cynthia Meng said in a research note.
She added that ZTE would benefit from a growing number of international 4G projects, including those with major carriers Telefonica, the MTN Group and Bharti Airtel.
The sharper focus by ZTE on telecommunications carrier equipment sales followed weaker growth in smartphone demand worldwide, especially in China - the world's biggest market for these devices.
Technology research firm Gartner said global smartphone shipments rose 13.5 per cent year on year to 330 million units in the second quarter, representing the slowest recorded growth rate for this market segment since 2013.
Anshul Gupta, a research director at Gartner, said in a report that the decline in smartphone sales in China "negatively affected" the global market since the country accounted for a 30 per cent share of last quarter's total shipments.
"China has reached saturation - its phone market is essentially driven by replacements, with fewer first-time buyers," Gupta said.
On Wednesday, ZTE reported an interim net profit of 1.62 billion yuan, up from 1.13 billion yuan in the same period last year.
That result matched the 43 per cent year-on-year growth estimate made by the company last month.
Meng said the strong growth was "mainly due to the faster progress of domestic carriers' 4G network deployment and increased [industry] investments in wireline switch and access systems".
Total interim revenue grew 21.8 per cent to 45.9 billion yuan, up from 37.7 billion yuan a year ago.
Network equipment sales to telecommunications carriers reached 28.51 billion yuan in the second quarter, contributing 62.1 per cent to total revenue.
Mobile phone sales of 9.96 billion yuan made up 21.7 per cent of total turnover, led by sales of mid-priced to high-end smartphones.
Telecommunications software, systems, services and other products accounted for 16.2 per cent of total revenue last quarter.
ZTE's share price rose to a high of HK$14.20 in trading on Wednesday before closing at HK$13.82, up 2.52 per cent.
