ZTE's US turmoil hits 2015 results - Mobile World Live

ZTE’s US turmoil hits 2015 results

06 APR 2016

ZTE reported lower 2015 profit and revenue from its January forecasts, as the company felt the effects of US sanctions for alleged trade violations.

The Chinese vendor, which had delayed the release of its 2015 annual report to assess the impact of export restrictions placed by the US, reported net profit of CNY3.2 billion ($493.3 million), a 22 per cent rise from 2014 figures of CNY2.6 billion, but still notably down from January’s preliminary unaudited figures, which projected a net profit of CNY3.78 billion.

Total revenue, as expected, still managed to pass the CNY100 billion milestone for the first time, hitting CNY100.2 billion for 2015, a 23 per cent increase from 2014, but was also below January’s forecast of CNY100.8 billion.

Yesterday, ZTE replaced three of its most senior executives, including president and CEO Shi Lirong, amid its US trade woes.

Last month, the company was slammed with tough export restrictions for breaching controls on the export of US technology to Iran, and other countries, following an investigation dating back to 2012.

In a separate statement providing clarity on the revisions, ZTE’s new president and chairman Zhao Xianming said the differences in figures between today’s announcement and those published in January “are mainly attributable to the impact of export restriction measures imposed on the company” by US authorities.

“Hence, the company has made adjustments to recognised contract revenue following reassessment of future cash inflows arising from related contracts as a prudent measure.”

Xianming added ZTE is cooperating with the US with their ongoing investigations of the company, which “may result in criminal and civil liberties under US laws”.

4G drives revenue growth
Despite being lower than expected, ZTE put its rise in revenue largely down to “increased sales from 4G system products and optical access products in the domestic and international markets”.

In domestic China, ZTE said the issuance of LTE-FDD permits, Internet+ and an increased uptake of optical fibre upgrades drove investments in 4G equipment and broadband networks, contributing to revenues of CNY53.11 billion, accounting for 53 per cent of total group revenue.

Carrier network revenue in total for the year was reported at CNY57.22 billion, a 30.22 per cent increase year on year, from CNY43.9 billion, which it put down to a strategy of “breaking into high end markets of Europe and North America with cutting edge solutions”, as well as stable growth in traditional 2G and 3G markets.

In its consumer business, the company reported revenue of CNY32.5 billion, an increase of 32 per cent year on year, from CNY28.6 billion in 2014.

Smartphone shipments totalled 56 million, a 16 per cent increase from 2014, with overseas shipments seeing 70 per cent growth.

The company sold 15 million smartphones in the US last year alone.

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Kavit Majithia

Kavit joined Mobile World Live in May 2015 as Content Editor. He started his journalism career at the Press Association before joining Euromoney’s graduate scheme in April 2010. Read More >>

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