The Chinese vendor expects a net loss of up to CNY 7.2 billion due to the impact of the temporary U.S. ban this year
Chinese vendor ZTE reported net profit of CNY 564 million ($81 million) for the third quarter as the company said it managed to strengthen cost control and reduce sales and management expenses on a year-on-year basis.
In the third quarter, ZTE posted operating revenue of CNY 19.3 billion. The firm’s operating revenue for the first nine months ended 30 September 2018 reached CYN 58.8 billion.
Meanwhile, net loss for the first three quarters amounted to CNY 7.26 billion, or just over $1 billion. For the full-year 2018, ZTE said it expects to record a net loss of between CNY 7.2 billion to CNY 6.2 billion, compared to a profit of CNY 4.57 billion (about $66 million) in 2017.
“During the first three quarters, ZTE adhered to the innovation-driven strategy, focused on valued customers and core products, proactively explored emerging technologies, and maintained great [research and development] investments in critical fields such as 5G wireless, core network, bearer, access and chipset,” the vendor said in a statement.
“ZTE’s major business are rapidly recovering with the negotiation and signing of new orders and the further implementation of existing orders. Meanwhile, the company has resumed normal operations in R&D, production and logistics. Specifically, its production and purchasing capabilities have been back on track, and its R&D progress has kept pace with the target preset at the beginning of the year. Also, ZTE has fully restored its customer services,” the company said.
ZTE also said it is currently having negotiations with major global carriers in order to secure new contracts.
ZTE’s business was impacted by a seven-year export ban imposed by the U.S Department of Commerce’s Bureau of Industry and Security (BIS) in March this year after it found that ZTE had violated sanctions the U.S. had imposed on Iran and North Korea. In early May, ZTE ceased its major operating activities due to the ban, which did not allow U.S. firms to ship key components, including chips, to ZTE.
In June, the Trump administration reached a deal with China to ease the penalties, allowing ZTE to resume business. On July 13, Secretary of Commerce Wilbur Ross announced that ZTE had placed $400 million in escrow at a U.S. bank. Shortly after the deposit, the department lifted the denial order on ZTE. The escrow funds are in addition to the $1 billion penalty imposed by Commerce that ZTE paid to the U.S. Treasury.
5G trials
In August, ZTE said it had completed tests of indoor 3.5 GHz and core 5G wireless network technology in the third phase of China’s national 5G testing program.
ZTE said that the first phase of the national 5G test will be the final stage before the technology can be commercialized in the Asian country.
ZTE also said that it aims to launch commercial trials of 5G technology in the second half of the year, which would be the initial step toward a more extensive commercial launch in 2019, according to the reports.
