ZTE appoints new chairman in management reshuffle amid talks with US to lift curbs

PUBLISHED : Tuesday, 05 April, 2016, 8:31pm
UPDATED : Tuesday, 05 April, 2016, 8:31pm

Chinese telecommunications powerhouse ZTE has named veteran executive Zhao Xianming as its new chairman and president in a sweeping senior management revamp, which could help repair the company’s damaged reputation with the United States government.

The management reshuffle saw Shi Lirong, who had been ZTE’s president since March 2010, accept a non-executive director role in the company, while founder Hou Weigui retired from the chairman’s post that he has held since February 2004.

Executive vice-presidents Tian Wenguo and Qui Weizhao have also stepped down, paving the way for the promotion of other executives to senior positions, according to the company’s filing with the Hong Kong stock exchange on Tuesday.

ZTE, China’s largest listed telecommunications equipment manufacturer, did not comment on the current state of discussions with the US Department of Commerce, which slapped the firm with export restrictions last month over its alleged violation of longstanding trade sanctions on Iran.

That issue forced the company to request the suspension of trading of ZTE’s shares in Hong Kong and delay announcement of its financial results for last year. Its earnings are expected to be announced on Wednesday.

In an internal memo released on Tuesday, Zhao assured that ZTE was moving to resolve the situation.

He pointed out that “extra measures” are being taken to ensure the company’s legal compliance.

That echoed ZTE’s statement from about two weeks ago, following the decision by the Bureau of Industry and Security of the US Commerce Department to grant the company a temporary general licence through June 30.

“This interim relief will enable ZTE to continue serving its major stakeholders as it works with the US authorities to reach a permanent resolution. ZTE is fully committed to complying with the laws and regulations in the jurisdictions in which it operates,” the company said last month.

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Under the export restrictions imposed on ZTE, its American suppliers of components and other products are required to apply for a licence to ship those items to the company.

A “licence review policy of presumption of denial shall apply” in that situation, ZTE said. It added that the US export restrictions also applied to affiliates ZTE Kangxun Telecommunications, Beijing 8-Star International and Iran-based ZTE Parsian.

“This may cause significant supply problems to both ZTE’s [network] equipment and handset businesses,” Jefferies analyst Cynthia Meng said in a research note.

Nomura research analyst Huang Leping said ZTE had completed the purchase of US components for its 2016 production schedule at the end of last year, which provided the company and the Chinese government with some lead time to negotiate a resolution to the US export restrictions.

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The US action stemmed from the commerce department’s probe of a 98.8 million (HK$872.5 million) contract between ZTE and the state-controlled Telecommunications Company of Iran for the supply of a powerful surveillance system.

Zhao, who previously served as an executive vice-president at ZTE and concurrent acting chief technology officer since last year, said his goal was to “rebuild [the company’s] operational philosophy”.

He joined ZTE in 1998 a year after graduating from the Harbin Institute of Technology, where he specialised in telecommunications and electronic systems with a doctorate in engineering.