ZTE shares rise to a two-year high as company sharpens 5G strategy

PUBLISHED : Wednesday, 21 June, 2017, 7:18pm
UPDATED : Saturday, 24 June, 2017, 4:09pm

ZTE Corp, mainland China’s largest-listed telecommunications equipment maker, is ratcheting up its focus on 5G infrastructure, as key markets around the world advance their preparations for deploying the next-generation mobile technology.

Yin Yimin, the chairman at ZTE, told shareholders at the company’s annual meeting on Tuesday that the plan is to increase investments in 5G, while providing improved service to major customers in strategic markets.

“ZTE will become a more competitive player in the industry globally and achieve a stronger market share position,” Yin said.

Investors seemed to approve of that message, as ZTE's share price rose 5.11 per cent to a two year-high of HK$18.50 on Wednesday.

The Shenzhen-based company will need to strongly execute that strategy against larger cross-town rival Huawei Technologies, the world’s biggest supplier of telecommunications equipment.

“The competition between Huawei and ZTE will be intense, but ZTE could increase its share on the mainland [through new network deployments] with China Telecom and China Unicom,” Jefferies equity analyst Edison Lee said.

A study published last week by the China Academy of Information and Communications Technology, the research arm of regulator the Ministry of Industry and Information Technology, forecast total 5G expenditure on the mainland to reach 2.8 trillion yuan (US$411 billion) from 2020 to 2030.

It estimated the combined 5G infrastructure spending of China Mobile, Unicom and China Telecom to peak at 313.3 billion yuan in 2023, creating what could be the world’s largest 5G market around that period.

A report published earlier this year by market research firm IHS Markit predicted the United States and mainland China to dominate 5G-related capital expenditure as well as research and development from 2020 to 2035. The US is expected to invest a total of US$1.2 trillion, compared with US$1.1 trillion by mainland China over that 16-year period.

ZTE president Zhao Xianming said the company’s recent research and development efforts have yielded new network equipment dubbed “Pre5G”, which has helped mobile network operators implement key 5G technologies ahead of the release of the universal standard known as IMT-2020 by the end of this decade.

The company, which has more than 1,500 patent applications on 5G network innovations, reported in March that its total research and development expenses last year reached 12.8 billion yuan.

Last week, ZTE said it agreed to conduct a 5G trial in metropolitan Tokyo this year with SoftBank Corp, the domestic telecommunications subsidiary of Japanese conglomerate SoftBank Group. SoftBank and ZTE started last year joint research and development work on so-called Massive Mimo, a large-scale antenna system for 5G mobile base stations.

Other major network operators that have forged strategic 5G development partnerships with ZTE include China Mobile, Unicom, Germany’s Deutsche Telekom, Spain’s Telefonica and KT Corp of South Korea.