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UPDATE 2-ZTE eyes emerging markets as Q3 net misses forecasts
October 27, 2010 / 12:37 PM / 7 years ago

UPDATE 2-ZTE eyes emerging markets as Q3 net misses forecasts

* Q3 net profit 483.94 mln yuan vs consensus 529 mln yuan

* Says business was impacted by EU and India policies

* To focus on emerging broadband markets in Q4

(Adds details, analyst comments)

By Melanie Lee

SHANGHAI, Oct 27 (Reuters) - ZTE Corp (0763.HK), China’s No.2 telecoms equipment maker, said it would increase its presence in emerging broadband markets after posting a weaker-than-expected rise in third-quarter profit weighed down by lost sales in India.

ZTE will target emerging broadband markets in the fourth quarter, gunning for growth as it braces itself for more regulatory uncertainity.

“Looking to the fourth quarter, the group will make strong efforts to seize opportunities presented by the popularisation of broadband connection in the markets of developing countries,” the company said in a statement.

The loss of sales in ZTE’s important India market has hit its earnings, with third-quarter revenue rising only 1.1 percent to 15.3 billion yuan.

Indian sales resumed only late last month, after New Delhi imposed a ban earlier this year on Indian mobile phone companies placing orders with it and rival Huawei Technologies [HWT.UL], citing security concerns. [ID:nSGE66F0A3]

“What jumped out was the low topline growth number,” said Lisa Soh, an analyst with Macquarie Research.

The firm is now facing issues in Europe. The European Commission said in September it has started an anti-subsidy investigation into some of ZTE’s data card products.

ZTE said the company was monitoring the situation and would cooperate with the European Commission in its investigations.

Third-quarter net profit was 483.94 million yuan ($73 million), an 18 percent increase from 408.7 million yuan a year ago but lagging an average forecast of 529 million yuan in a Reuters poll of two analysts.

Sales at ZTE’s terminals segment, which includes its fast-growing handset business, rose 30.5 percent in the first nine-months of the year.

ZTE and Huawei grew up selling to the Chinese mobile market, the world’s largest with more than 800 million users. But increasingly both have become formidable players on the world stage, scoring major contracts in Europe and developing markets.

ZTE has made even more significant inroads with its device business, launching a wide array of low-cost smartphones and mobile computing devices that have won acceptance in some developed countries.

ZTE said in September its cellphone sales jumped 40 percent in the first half of 2010, fuelled by strong demand from international markets and for smartphones. [ID:nHKM000031]

ZTE told Reuters earlier this month it had received interest from European and Asia Pacific carriers for its tablet PC device which it plans to start selling in China by January.

“ZTE still has many areas to grow in, if you look at the tablet PC area, they said they are going to launch a tablet, that has a high chance of success,” said Zhang Yanan, an Analysys International analyst.

Before the results were released, ZTE shares closed the session down 1.25 percent at HK$31.50

ZTE shares have fallen about 1.6 percent so far this year, underperforming a 6 percent rise in the broader Hang Seng Index .HSI. (Reporting by Melanie Lee; Editing by Karen Foster)

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