China Development Bank (CDB) will expand its financing facility for ZTE to US$20 billion.
Citing the uncertain economic recovery in the United States and the debt crisis in Europe as primary factors that weaken growth in the global telecommunications market, CDB said its financial support could help ZTE achieve a stronger market position internationally.
“We sincerely thank the CDB for their commitment to ZTE’s development of overseas operations,” Mr. Hou said. “ZTE is in a leading position in the worldwide telecommunications industry, and has a comprehensive strategy to address markets globally. ZTE will leverage the CDB’s financial support and grasp the opportunities in the markets for 4G, fixed broadband, enterprise networks and terminals, consolidate our advantages and migrate to the higher value solutions, as we aim to achieve a global top-3 position before 2015.”
In 2005, CDB supplied an initial US$8 billion credit facility to ZTE. In 2009, the facility was increased to US$15 billion.
http://wwwen.zte.com.cn/en/press_center/news/201212/t20121204_372570.html
In October 2012, despite higher revenue overall for the first nine months of 2012, ZTE reported a preliminary loss of between RMB1.65 billion and RMB1.75 billion, a reversal of between 254.42% and 263.78% compared to the same period of a year earlier. For the most recent quarter (ended 30 September 2012), ZTE’s revenue decreased by approximately 13% as compared to same period last year.
ZTE apologized to shareholders for the poor results and cited four factors for its weaker performance:
(1) the current global economic and industry trends,
(2) the recognition of low-margin contracts in the third quarter,
(3) a delay in some projects of overseas clients, and
(4) a change in the procurement mode of domestic operators.
In China, ZTE was hit by, a change in the operators’ procurement mode and the timing of their investments.
In the international market, ZTE said operators slowed down their pace of investments because of a weakening global economy. ZTE’s gross profit decreased significantly due to the recognition of some lower-margin contracts. In Africa, where the company was previously able to achieve higher-margin business, the overall market was undergoing a transitional stage, resulting in fewer new contracts.
ZTE also acknowledged that its results were adversely affected by operations in Iran. The company noted that these operations are being investigated by the U.S. Department of Justice and U.S. Department of Commerce.
The company outlined several steps to address these problems:
- ZTE’s management has agreed to cut their own compensation collectively.
- ZTE will raise its level of responsiveness to the internal and external environment
- ZTE will conduct a review of its product portfolio and of its regional operations
- ZTE will put profit at the center of its focus and be committed to increasing the profitability of contracts and reducing the losses of unprofitable businesses.
- ZTE will reduce its selling costs and research and development expenses.
- ZTE will eliminate offices that record losses for a long time and which have limited prospects of a turnaround.
- ZTE will consolidate products that offer little development potential,
- ZTE will exercise headcount control and conduct organizational change.
ZTE said its new strategy calls for more resources on its terminals business in North America and Europe. The company will proactively pursue opportunities in the wireless and wired broadband segments in emerging markets including China and Asia Pacific.
