ZTE confirms loss in 2016 due to guilty plea in Iran sanctions case

ZTE admitted it slipped to a net loss of 2.36 billion yuan in 2016 due to fines associated with the Iran sanctions case, though revenue increased by 1 percent to 100.18 billion yuan.
Written by Tas Bindi, Contributor

ZTE Corporation has released its financial results for 2016, reporting full-revenue of 101.2 billion yuan, an increase of 1.04 percent to the 100.18 billion yuan reported in the previous corresponding period.

The Chinese telecommunications hardware vendor, which had delayed the release of its 2016 annual report to assess the impact of the Iran sanctions case, admitted it slipped to a net loss of 2.36 billion yuan in 2016 due to fines associated with the case. This includes the $892 million ZTE is required to pay to the United States to settle the case.

"Without the provision, ZTE would have posted a net profit of 3.83 billion yuan, 19.2 percent higher than a year earlier," the company stated.

ZTE attributed its "positive" financial results to the growth of its carrier networks and consumer businesses, which increased 2.9 percent to 58.9 billion yuan and 3.02 percent to 33.5 billion yuan in 2016, respectively.

The company identified increased deployments of its network solutions as well as increased sales of its smartphones in the US, Europe, and Australia, as contributors to its growth.

ZTE claimed to be the fourth-largest smartphone vendor in the US and has moved to up to the number five position in Europe. In Australia, ZTE is the third-largest smartphone vendor.

Meanwhile, the company boasted it was number one in the latest international patent rankings published by the World Intellectual Property Organization (WIPO) due to its developments in 5G, cloud computing, big data, semiconductors, and the Internet of Things.

ZTE filed more than 4,123 applications for patents under the Patent Cooperation Treaty in 2016, with more than 1,500 related to 5G, according to WIPO data. Occupying the second position was Huawei, with 3,692 patent applications filed in 2016, followed by Qualcomm with 2,466 applications.

Earlier in March, ZTE agreed to plead guilty to three charges: Conspiracy to unlawfully export, obstruction of justice, and making false statements to federal investigators, according to a plea agreement released by the Department of Justice (DOJ).

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

In addition to $892 million, ZTE is liable to pay $300 million, suspended during a seven-year period, if it fails to comply with the requirements of the agreement, which include an independent compliance monitor.

However, this is not the first time that ZTE has found itself in trouble after doing business in Iran. Following a 2012 investigation by the FBI and Commerce Department, among others, Cisco ended its sales partnership with ZTE. At the time, ZTE was alleged to have set up a network of sub-companies to illegally export products from Microsoft, HP, Oracle, Dell, Cisco, and Symantec to Iran.

ZTE also found itself embroiled in a Mongolian corruption probe in 2013 following the arrest of a Mongolian tax official who handled ZTE's tax affairs.

At the start of 2017, it was revealed that ZTE would axe 5 percent of its 60,000 global workforce in Q1 2017.

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