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ZTE's third-quarter profit rises 10.5 percent despite threat of U.S. trade curb
October 27, 2016 / 10:11 AM / a year ago

ZTE's third-quarter profit rises 10.5 percent despite threat of U.S. trade curb

HONG KONG (Reuters) - Chinese telecoms equipment group ZTE Corp (000063.SZ) (0763.HK), which is still facing the threat of curbs on trade with U.S. firms, reported a 10.5 percent rise in its third-quarter net profit on Thursday.

ZTE's logo on its R&D center is seen in Beijing, China, in this March 22, 2016 file picture.REUTERS/Kim Kyung-Hoon/File Photo

Net profit for the three months to Sept. 30 rose to 1.09 billion yuan ($160 million), the firm said in a statement. Revenue rose 5.23 percent to 23.8 billion yuan from the same period last year.

ZTE is still facing the imposition of a trade ban on U.S. component makers and software firms supplying ZTE, essentially cutting off much of the supply chain for the network equipment and smartphones ZTE makes.

The U.S. Commerce Department ordered the trade ban earlier this year over allegations that it violated rules restricting the exports of U.S. technology to Iran, but then lifted the ban while it seeks to reach a settlement.

Presenting a threat to ZTE’s global operations, as well as its brand image, the export restrictions have weighed heavily on ZTE’s share price this year, with the shares down 35 percent in Hong Kong.

“The Company will continue to maintain cooperation with relevant U.S. government authorities and actively liaise with them to reach a final solution, and will strictly comply with U.S. laws and regulations relating to export restrictions,” ZTE Chairman Zhao Xianming said in a statement on Thursday.

Analysts said the issue adds uncertainty to ZTE’s business outlook as demand for fourth-generation (4G) telecom infrastructure is expected to slow in China as major carriers complete their network coverage.

“ZTE’s handset business is also facing strong competition that makes it difficult for it to improve its market share that is small at the moment,” said Ricky Lai, a Hong Kong-based analyst with Guotai Junan Securities.

PROJECT INVESTMENT FUND

ZTE said in a separate filing to the stock exchange on Thursday that it will set up a 5-billion yuan investment fund with a unit of GF Securities that would focus on ‘smart’ cities, underground pipe networks and data center projects related to its business.

Guangfa Hexin, an investment company controlled by GF Securities, and ZTE subsidiary ZTE Xingyun will be general partners of the new Guangxing Yunhe Industrial Equity Investment Fund.

Reporting by Sijia Jiang; Editing by Kenneth Maxwell, Greg Mahlich

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