ZTE shares jump as Chinese telecoms giant returns to profit

ZTE made profit of 4.55 billion yuan in 2017, rebounding strongly from a net loss of 2.36 billion yuan a year ago, according to preliminary results

PUBLISHED : Friday, 02 February, 2018, 12:41pm
UPDATED : Friday, 02 February, 2018, 11:45pm

Shares of China’s largest listed telecom equipment supplier, ZTE, jumped as much as 6.5 per cent in Hong Kong on Friday morning as preliminary results showed the company had returned to profit.

ZTE made profit of 4.55 billion yuan (US$720 million) in 2017, rebounding strongly from a net loss of 2.36 billion yuan a year ago, according to a preliminary announcement on Thursday evening.

The stock opened 2.8 per cent higher at HK$27.3 on Friday, and rose to HK$28.3 by about 10am, an increase of 6.5 per cent from yesterday’s closing price of HK$26.55. It lost some ground in the afternoon, closing 3.96 per cent higher at HK$27.6.

The company attributed the turnaround in profits to investments in global telecommunication networks, the development of overseas markets for handsets, and growth of its three key business segments – carrier, consumer, and government and corporate.

ZTE is due to release its detailed results for 2017 on March 15.

The company paid about US$826 million to the US government in 2017 towards settling penalties for its violation of long-standing trade sanctions on Iran and North Korea.

ZTE’s performance last year is particularly impressive in comparison with its two main competitors, Nokia and Ericsson, according to a report published on Friday by Edison Lee, an equity analyst with Jefferies. Nokia and Ericsson reported a 3 per cent and 7 per cent year-on-year decline, respectively, in network revenue for the same period.

On Wednesday, Shenzhen-based ZTE announced that it planned to raise 13 billion yuan via a private placement, of which 9.1 billion yuan would be used to expand its investment in research and development of 5G technology.

“The company expects that 2018 to 2020 will be a crucial period for the formulation and industrialisation of the global standard for 5G technology,” ZTE said on Wednesday, adding that it will continue to focus on 5G as its core strategy.

Cheng Lixin, CEO of ZTE’s mobile device business told Bloomberg in an interview last month that the company aims to launch a smartphone with 5G internet capabilities in about a year.

But ZTE, currently the fourth largest smartphone vendor in the US, has failed to secure a top-five spot in its domestic market, lagging far behind brands like Huawei, Oppo and Vivo.