China’s ZTE takes over Netas for $101m, eyes expansion in Turkey

ZTE Corp, China’s largest-listed telecommunications equipment manufacturer, has agreed to take over Turkish company Netas Telekomünikasyon for up to US$101.28 million in a deal that would expand its operations across key markets covered by Beijing’s “One Belt, One Road” initiative.

The transaction will see ZTE acquire a 48.04 per cent share of Netas from Dutch investment firm OEP Turkey Tech and become its largest shareholder, according to the mainland company’s filing to the Hong Kong stock exchange on Tuesday.

Established in 1967, Netas is a major manufacturer and supplier of telecommunications equipment in Turkey. It is also a large information technology outsourcing and systems integration services provider to enterprises and telecommunications network operators in Turkey, the Commonwealth of Independent States (CIS), the Asia-Pacific and North Africa.

The Turkish Armed Forces Foundation has a 15 per cent interest in Netas, while publicly traded shares account for 36.96 per cent.

“With Netas’ strong project delivery capabilities, ZTE will further enhance its service capabilities to customers in Turkey as well as several key overseas markets,” ZTE chairman and president Zhao Xianming said in a statement on Tuesday.

The One Belt, One Road trade strategy that President Xi Jinping unveiled in 2013 is composed of two legs: the New Silk Road Economic Belt connecting China with Europe overland and the Maritime Silk Road that links the mainland to the countries in Southeast Asia, Africa and Europe.

Turkey, following the new Silk Road leg, would be an important bridge for ZTE and other mainland companies to grow their business across the vast CIS economies, which include the neighbouring Central Asian republics of Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan and Turkmenistan.

Netas chairman David Walsh said the company aimed to further expand operations internationally. “With ZTE’s investment, global reach and product depth, Netas is extremely well-positioned for future success,” Walsh said.

Listed in the Borsa Istanbul, Netas posted an 18 per cent year-on-year increase in revenue to TL655 million (HK$1.44 billion) for the nine months to September 30.

Zhao pointed out that Netas’ scope of business and corporate direction was consistent with ZTE’s own strategy around M-ICT, a shorthand for the so-called mobile interconnection of all things, which is expected to transform the mainland firm’s operations and expand its businesses over the next five years.

Shenzhen-based ZTE said its acquisition of Netas is subject to the approval of the Competition Board of Turkey.

The mainland company in October reported a 4.4 per cent year-on-year revenue growth to 71.56 billion yuan (HK$79.45 billion) in the nine months to September 30.

Nomura analyst Huang Leping has said that “ZTE’s long-term growth story remains intact”, although United States export restrictions remain a source of concern for investors.

ZTE last month was granted a reprieve for the fourth time by the US from export restrictions over its violation of long-standing trade sanctions on Iran.