UPDATE 1-ZTE sells monitoring unit for 1.3 billion yuan

Fri Dec 28, 2012 6:31am EST

* Sells control of business to Ocean Delight

* Sale to provide net gains of up to $140 mln

* Sale is part of group plan to focus on main business (Adds quote, details)

HONG KONG, Dec 28 (Reuters) - ZTE Corp, China's second-largest telecoms equipment maker, agreed on Friday to sell 81 percent of an environmental monitoring business for 1.3 billion yuan ($208.5 million), which will contribute to its bottom line in 2013.

ZTE in the third quarter logged its biggest quarterly loss since it went public in Shenzhen in 1997, though executives said it would turn profitable for the full year.

ZTE Corp sold a 65 percent equity interest in Shenzhen ZNV Technology Co Ltd, and the group's wholly owned unit ZTE HK sold another 16 percent to Ocean Delight Investments Limited, it said in a statement on the Hong Kong stock exchange on Friday.

Shenzhen ZNV provides environmental monitoring systems and visual monitoring for telecoms firms, utilities, rail lines and other businesses.

"The disposal allows the company to concentrate and focus on its main business, which is in line with the company's strategic development needs," ZTE Corp said.

The sale of the 81 percent stake will help boost ZTE's net gains in 2013 in the form of investment income by 820 million to 880 million yuan, it said.

The Shenzhen-based company, which competes with bigger rival Huawei Technologies Co Ltd in the global telecoms equipment and handsets business, has seen its bottom line suffer due to sluggish telecoms spending and thin mobile phone margins.

The group ranks as the world's fifth-largest telecoms equipment maker and fourth-largest mobile phone maker.

ZTE and Huawei have both come under scrutiny in the United States, where a Congressional committee report in October said they posed potential threats to cyber security.

ZTE shares, which have fallen by nearly half since the beginning of this year, ended up 1.1 percent at HK$12.98 on Friday.

On completion of the sale, Ocean Delight will own 81 percent of the monitoring business, ZTE HK 9 percent and Shenzhen Qunxian Technology 10 percent, the filing said.

Ocean Delight was incorporated in Hong Kong in November, according to an enterprise database. For a copy of the statement, please click here ($1 = 6.2360 Chinese yuan) (Reporting by Lee Chyen Yee and Alison Leung; editing by Jane Baird)

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