Earnings reports



ZTE posts solid first-quarter profit, bolstering its anticipated return to growth

Shenzhen-based telecoms powerhouse posts 27.8pc jump in net quarterly profit to 1.2b yuan. Revenue grows 17.8pc to 25.7b yuan, ahead of expectations

PUBLISHED : Monday, 17 April, 2017, 7:49pm
UPDATED : Monday, 17 April, 2017, 11:00pm

ZTE Corp, the Chinese telecommunications powerhouse, has posted stronger-than-expected financial results for the first quarter, buoying the company’s anticipated return to growth after an arduous year in US sanctions purgatory.

Shenzhen-based ZTE reported a 27.8 per cent jump in net profit to 1.2 billion yuan (US$174 million) on Monday for the three months ended March 31, up from 949.5 million yuan in the same period last year, on the back of increased sales of network equipment to telecommunications carriers and smartphones.

Revenue grew 17.8 per cent to 25.7 billion yuan from 21.8 billion yuan a year earlier, surpassing analysts’ consensus market estimates of 22.7 billion yuan.

The announcement marked the first quarterly financial report for ZTE, the world’s fourth-largest telecommunications equipment supplier by revenue, since it was officially removed from the US trade blacklist on March 29.

ZTE declined to provide a breakdown of the markets for its telecommunications carrier equipment sales, but pointed out that its so-called Pre5G products are now deployed in some 40 networks across 30 countries.

The company added that it was on track to begin pre-commercial 5G equipment deployment in the third quarter of next year, with full commercial deployment expected to start in 2019 when the universal standards for 5G are finalised.

“Now that the US has lifted its export ban on ZTE, foreign carriers will no longer worry about the company’s ability to deliver,” said Jefferies equity analyst Edison Lee.

He indicated that ZTE was addressing the problem of profitability in its smartphone operation by shrinking that business in mainland China and growing international sales.

Now that the US has lifted its export ban on ZTE, foreign carriers will no longer worry about the company’s ability to deliver
Edison Lee, Jefferies equity analyst

“We believe ZTE has strong carrier relationships in the US and selected European countries, and the margins there remain healthy,” he said.

ZTE last month said it was working with US carriers like T-Mobile and AT&T on services that will help car owners store driving information on their smartphones and give passengers in-car connectivity.

Listed in both Hong Kong and Shenzhen, ZTE was taken off the US government’s so-called Entity List upon recommendation of the Bureau of Industry and Security (BIS), which is under the US Department of Commerce.

That followed its deal earlier last 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 seven-year probationary period.

The BIS had slapped ZTE with export restrictions on March 7 last year, which barred its suppliers from shipping any US-made hardware and software components to the Chinese company, after a five-year probe over violating longstanding trade sanctions on Iran and North Korea.