Exclusive | ZTE moves ahead with US settlement steps as investors wipe US$3 billion off market value
ZTE moves to implement US settlement measures but investors punish company on expectations ban could force company into a loss
ZTE has appointed a three-person team to oversee implementation of its settlement with the US government as investors on Wednesday wiped about US$3 billion off the Chinese telecom maker’s market value, underscoring the need for the company to resolve the matter quickly.
The team’s key responsibilities include replacing the board of directors and firing senior executives at ZTE. The Shenzhen-based company appointed Shen Nan to lead the team, with two assistants, according to an internal memo seen by the South China Morning Post. Shen is ZTE’s chief intellectual property officer and acting chief compliance officer. ZTE declined to comment.
ZTE shares fell 42 per cent in Hong Kong to HK$14.96 and by the daily limit of 10 per cent to 28.18 yuan in Shenzhen. The shares resumed trading after ZTE said it had agreed to pay an additional US$1 billion in fines to the US Department of Commerce and put US$400 million as surety as part of its settlement for violating US prohibitions against selling equipment to Iran. The agreement also required the company to replace its board and terminate all executives ranked above senior vice-president as well as anyone involved in the Iran violations.
The company is trying to speed up the process of paying the fine and has applied to the US commerce department’s Bureau of Industry and Security to open a bank account in the US to deposit the US$400 million escrow payment, according to people with knowledge of the matter.
ZTE has also rolled out plans for all of its 80,000-plus employees to undergo compliance education, all in the hopes of resuming operations as early as possible, the people said. The company had shut major operations last month after the US activated a ban prohibiting it from buying American parts.
In a meeting for senior management on Tuesday, ZTE chairman Yin Yimin said that the company needs its 80,000 employees to have “thorough knowledge” and “thorough supervision” of each other when it comes to compliance, rather than rely on a few people from a compliance team.