ZTE back to black following US trade fine

ZTE has spruiked 'strong' US network partnerships for its return to profit after paying a $900 million fine for illegally exporting products to Iran and being removed from the US Department of Commerce's trading blacklist.
Written by Corinne Reichert, Contributor

ZTE has called itself "one of the top smartphone providers in the US", with the Chinese telecommunications technology solutions provider following up a full-year net loss of 2.36 billion yuan with a quarterly net profit of 1.2 billion yuan.

The positive financial results came just weeks after the US Department of Commerce's Bureau of Industry and Security (BIS) removed ZTE from its trading blacklist following the company pleading guilty to illegally exporting products to Iran.

It was found that ZTE had either directly or through third-party distributors shipped $32 million worth of products containing American-made equipment to Iran between 2010 and 2016 without the proper licensing.

ZTE was fined $1.2 billion in total by the United States to settle the case, and agreed to appoint an independent compliance monitor.

While the incident affected its 2016 financial results -- reporting a full-year net loss of 2.36 billion yuan due to the fines associated with the case, and announcing in January that it would have to axe 5 percent of its 60,000 global workers in the first quarter of 2017 -- ZTE has now reported its Q1 net profit as rising by 27.8 percent year on year on operating revenue of 25.7 billion yuan, up by 17.8 percent.

During its results presentation on Monday, ZTE said it will prevent future violations from occurring by reviewing its "organisational structure, business processes, and internal control".

ZTE CEO Zhao Xianming last month also said that the company is committed to being "trustworthy" in future so that it can continue trading in the United States.

"ZTE is turning the page on a challenging chapter in our past and is optimistic of our future. By acknowledging the mistakes we made, taking responsibility for them, and remaining focused on enacting positive change in our company, we are committed to a ZTE that is fully compliant, healthy, and trustworthy," the chief executive said.

"With this settlement behind us -- and coupled with recent efforts to streamline operations and grow ZTE's innovative leadership around 5G -- we anticipate continued growth and business expansion over the next several years as we continue to work with our partners in the US and around the world."

ZTE said on Monday that it had bolstered its partnerships with American network operators during the first quarter of calendar 2017 through both consumer devices and connected vehicles solutions.

"ZTE will also deepen its collaboration with partners and customers to build healthy and sustainable industry ecosystems and mutually beneficial relationships," the Chinese giant said.

ZTE attributed its rise in profit and revenue to increasing sales of its smartphones, as well as its carrier networking solutions for 4G-advanced and pre-5G networks.

Having unveiled its Daydream-ready Axon 7 and Blade V8 smartphones earlier this year, ZTE said it is also strong in the Chinese and Japanese markets, thanks to an industry-leading smartphone encryption solution "for more robust information security".

ZTE spent around 12.9 percent of its quarterly revenue on research and development, saying it is "strengthening its position as a global leader in 5G research", particularly across the frequency-division duplex 4G (FDD-LTE) massive Multiple-Input Multiple-Output (massive MIMO) solution ahead of the launch of 5G.

ZTE also introduced its 5G Flexhaul solution during the quarter, labelling it a "5G-ready bearer network product that integrates IP and optical transport technologies".

Its virtualised network solution is now also deployed in over 180 networks across the globe, while its pre-5G products have been deployed in more than 40 networks across 30 countries. The company is eyeing pre-commercial 5G deployments in the third quarter of 2018 and full commercial deployment beginning in 2019.

ZTE said it is also gaining market share in passive optical network (PON) products, fixed access products, cloud solutions, set-top boxes, datacentre services, artificial intelligence, and narrowband Internet of Things (NB-IoT) solutions such as for smart parking, as well as the chipsets, devices, and networks behind these.

"In the government and corporate business, ZTE is consolidating its position as one of the global leaders in smart city technologies, with new projects in major Chinese cities, as well as in Western European markets including Germany and France," ZTE detailed.

Shipments of ZTE's chipsets grew by 70 percent year on year.

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