ZTE first-half net profits seen speeding up on 4G network growth

ZTE Corp, the largest listed telecommunications equipment supplier on the mainland, is expected to see a significant jump in revenue and profit, owing to the country's introduction of fourth-generation (4G) networks, industry experts say.

In July, the company revised up its estimated net profit for the first half of the year to between one billion yuan (HK$1.26 billion) to 1.15 billion yuan, up from a target of 800 million yuan to one billion yuan set in April. ZTE posted a net profit of 310 million yuan in the period last year.

The increases in both gross profit margin and gross profit for the first half is "due to ongoing strengthening of management over contract profitability, improvement in gross profit margin for international projects as well as an increase in the operating revenue from domestic 4G systems projects as a percentage of total operating revenue", the company said in a earlier filing to the Hong Kong stock exchange.

The Shenzhen-based company will report its results on Wednesday.

Yan Chengyin, an industry analyst at Bayes Consulting in Beijing, said the launch of the 4G network at the end of last year on the mainland boosted the revenue growth of telecommunications equipment companies including ZTE.

"The momentum is expected to continue in the second half, as after the TD-LTE licence, China Unicom and China Telecom were also granted FDD-LTE licences this year," Yan said.

He said telecommunications companies will accelerate the building of 4G networks and ZTE will benefit as the leading contractor.