ZTE still without new management team as US export ban partially lifted

ZTE is moving quickly to meet settlement terms after facing huge losses from shutdown in the wake of US ban

PUBLISHED : Wednesday, 04 July, 2018, 2:42pm
UPDATED : Wednesday, 04 July, 2018, 11:18pm

The temporary lifting of parts of a US export ban on ZTE is unlikely to yield a substantial business recovery any time soon, as the Shenzhen-based company is still in the process of laying off the previous management team, leaving it with no head to guide operations.

ZTE is on track to complete the dismissal of the previous senior management team by Thursday, including all executive vice-presidents (EVPs) and those senior vice-presidents (SVPs) who have not been granted exemptions from the terms of a settlement to lift the US export ban, according to people familiar with the situation.

The company has also terminated the contracts of at least seven employees on the 35-name list of people involved in previous illegal sales to Iran and North Korea, including three vice presidents from the legal affairs department, financial monitoring department and supply chain planning department, as well as four directors from the compliance management department, information security management department, international financing department and Africa sales office, said the people, who asked not to be named as the information is not public.

ZTE allowed to resume business as US temporarily lifts ban

As part of a settlement with the US Commerce Department, ZTE needs to replace the entire board and senior executives as well as anyone involved in the Iran violations within 30 days from June 7. ZTE declined to comment on its plans for a resumption of its operations on Wednesday.

The Trump administration on Tuesday temporarily lifted part of a ban it had placed on ZTE Corp, allowing the Chinese telecoms giant to resume some of its business activities while the US Congress continues to weigh penalties on the company.

The release by the US Commerce Department’s Bureau of Industry and Security takes effect immediately and runs through the end of the month. Under the temporary authorisation, ZTE is allowed to resume receiving shipments from its American suppliers, according to a BIS announcement published on its website on Tuesday.

ZTE may have received a reprieve in US, but China Mobile is next target

Although the authorisation permits ZTE to support existing networks or equipment under contracts signed on or before April 15, when the Chinese telecom equipment provider was banned from buying components from the US, the company is unlikely to immediately resume operations due to a management vacuum, said one of the people familiar, adding that any senior vice-presidents exempted from the firing process may take on bigger roles in future.

ZTE has suffered huge losses from a shutdown of its operations in the wake of the US ban. The company, which had revenue of 108.8 billion yuan (US$16.7 billion) last year, has faced losses of several million yuan per day, excluding miscellaneous penalties due to breach of contract with some clients

The Shenzhen company last week appointed Li Zixue as its new chairman. The 54-year-old Li was formerly deputy director of the Xi’an Microelectronics Technology Institute, a state research organisation, and someone who backed the founding of ZTE decades ago. He has promised a resumption of operations at ZTE as soon as the export ban is lifted by the US government.