ZTE profit climbs on 4G projects, overseas smartphone demand

Shenzhen-based telecommunications equipment supplier has reported a 29.8pc increase in net profit for the six months ended June 30

PUBLISHED : Wednesday, 19 July, 2017, 8:51pm
UPDATED : Saturday, 19 August, 2017, 3:55pm

ZTE Corp, mainland China’s largest-listed telecommunications equipment manufacturer, has reported a 29.8 per cent year-on-year increase in net profit for the six months ended June 30, driven by steady 4G infrastructure demand and renewed growth in its smartphone business.

Shenzhen-based ZTE saw its interim net profit reach 2.3 billion yuan (US$340 million), up from 1.8 billion yuan in the same period last year, as “domestic carriers continued to invest in transmission and access systems for 4G projects”, said company chairman Yin Yimin in a preliminary financial results announcement on Wednesday.

Revenue advanced 13.1 per cent to 54 billion yuan from 47.7 billion yuan a year ago.

Shares in ZTE rose 3.5 per cent to reach HK$18.90 at the close of trading in Hong Kong.

The company, the world’s fourth-largest telecommunications equipment supplier by revenue, has seen its share price climb since emerging from US sanctions purgatory on March 8 this year. Its shares hit a two-year high of HK$19.20 on June 23.

“ZTE’s interim net profit and revenue are stronger than market consensus forecasts,” Jefferies equity analyst Edison Lee said. “The company also showed a recovery in its smartphone business in the United States and Europe.”

ZTE was the world’s eighth-largest smartphone supplier in the first quarter on shipments of 12.1 million handsets, cornering a 3.2 per cent market share behind Xiaomi and ahead of Lenovo Group, according to Counterpoint Research.

Lee said there are “plenty of positive catalysts” for the company, following its deal to pay record-high penalties totalling US$1.2 billion to the US government as settlement for violating long-standing trade sanctions on Iran and North Korea.

ZTE, along with larger rival Huawei Technologies and other mainland network equipment and smartphone suppliers, are expected to benefit the most from 5G-related capital spending on the mainland over the next decade, according to a study published last month by the China Academy of Information and Communications Technology.

The study forecast total 5G expenditure on the mainland to reach 2.8 trillion yuan from 2020 to 2030.

It estimated the combined 5G infrastructure spending of China Mobile, China 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.

ZTE said its range of so-called Pre5G equipment, which supports the evolution of 4G mobile networks to 5G, are now deployed in more than 40 countries, including the mainland, Japan, Austria, Singapore, Spain, Malaysia, Thailand and Indonesia.