ZTE on line for solid year as first-quarter sales forecast to increase
Now its US export ban has been lifted, analysts expect Chinese tech giant to be in a much-stronger position to gain market share internationally
ZTE Corp is expected to post a modest year-on-year increase in revenue for the first quarter, roughly three weeks after Washington removed the Chinese technology company from the US trade blacklist.
“Now that the US export ban has been lifted, we expect ZTE to be in a much-stronger position to gain market share internationally,” said Jefferies equity analyst Edison Lee.
ZTE, listed in both Hong Kong and Shenzhen, is predicted to report a 4 per cent rise in revenue to 22.7 billion yuan (US$3.3 billion) on Monday for the three months ended March 31, up from 21.8 billion yuan in the same period last year, according to consensus estimates from a Bloomberg poll of analysts.
The company, China’s largest listed telecommunications equipment manufacturer, emerged from a year in US sanctions purgatory after it was taken off Washington’s so-called Entity List on March 29 upon recommendation of the Bureau of Industry and Security (BIS), which is under the US Department of Commerce.
That followed ZTE’s deal earlier that month to pay record-high civil and criminal penalties totaling US$1.2 billion to the BIS, the US Department of Justice and the Office of Foreign Assets Control under the US Department of the Treasury.
Of that amount, a US$300 million penalty payable to the BIS was suspended for a probationary period of seven years.
After setting aside a hefty sum for that combined penalty, ZTE reported last month its first annual loss since 2012. It posted a 2.3 billion yuan net loss last year, compared with a 3.2 billion yuan profit in 2015.
ZTE cornered a 4.3 per cent share of total global telecommunications equipment capital expenditure last year, according to combined estimates from Jefferies and research firm IHS Markit.
Privately-held Huawei Technologies had a 21.6 per cent share, followed by Cisco Systems with 20.7 per cent, Nokia’s 11 per cent and Ericsson with 10.9 per cent.
Jefferies’ Lee said ZTE recently landed a deal for an undisclosed amount with mobile network operator Digicel, which is owned by Irish billionaire Denis O’Brien, to expand its 4G network in 26 markets across the Caribbean and Central America.
“ZTE indicated the contract was not very big, but we believe the significance is that Digicel is a new customer, and ZTE very likely displaced, at least partly, the original vendor Ericsson. This is the first international contract awarded to ZTE after its US export ban was lifted,” Lee said.
“Huawei’s market leadership and its likely focus on profitability will help ZTE win market share outside China [this year], in our view.”
ZTE’s share price slid down 1.29 per cent to close at HK$13.80 last Thursday, ahead of the Easter break.