ZTE expects a return to the black

02 Feb 2018

Chinese telecoms vendor ZTE said it expects to return to profit in 2017, bolstered by growth in the company’s carrier networks and consumer businesses.

In filings with the Hong Kong and Shenzhen stock exchanges, ZTE said it estimated its preliminary net profit of RMB4.55 billion ($724 million), up 293% against a loss of RMB2.36 billion the previous year.

“In 2017, the company focused on the market of mainstream carriers and high-value customers, and persisted in a proactive yet prudent business strategy while exploring new opportunities for growth,” ZTE said in a statement.

Operating revenue rose 7.49% to RMB108.82 billion in 2017 on the continuous investments in telecoms networks by global carriers and the development of overseas markets for handsets and government and corporate businesses.

ZTE said the company also strengthened its cash flow and sales revenue collection management.

The company paid about $826 million to the US government in 2017 to settle a sanctions case. Excluding the impact of penalty payments imposed by U.S government authorities, net cash flow was RMB12.44 billion, up 136.58% over the previous year.

To raise over $2 billion to fund 5G plans

The company has also announced plans to raise RMB13 billion ($2.1 billion) via private share replacement to support research and development on 5G mobile technology.

ZTE will issue no more than 686.8 million of its Shenzhen-listed A shares to no more than 10 specific subscribers, the company said in separate filings to the stock exchanges.

The Shenzhen-headquartered firm said 9.1 billion yuan of the funds raised will be used for research and product development related to 5G network technology and RMB3.9 billion to replenish its working capital.

The issuance is subject to the approval of shareholders and regulators in mainland China.

ZTE said the funds will help the company achieve its ambition to secure a leading position in 5G innovations through the continuous expansion of its investment in R&D and marketing for its core segments.

“2018 to 2020 will be a crucial period for the formulation and industrialization of the global standard for 5G technology” ZTE said.

“The company will continue to focus on 5G technology as its core strategy, and will commit its effort to various aspects including the formulation of standards, product research and development and commercial verification in order to maintain its leading position in terms of progress development, product functionality and cost advantage. “

In addition to ZTE, Ericsson earlier also secured $370 million funding for its development on 5G and other investment.

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