Showing posts with label ZTE. Show all posts
Showing posts with label ZTE. Show all posts

Tuesday, July 2, 2019

China Mobile approves ZTE's CE-band 96-wavelength system

ZTE's commercial CE-band 96-wavelength beyond 100G OTN system passed the on-site test of Hubei Branch of China Mobile and the FOA network access test of China Mobile Group.
Compared with the traditional C-band 80-wavelength 100G system,

ZTE’s CE-band 96-wavelength 200G system increases the capacity by 140% compared with a C-band 80-wavelength 200G system.

In August 2018, ZTE cooperated with Hubei Branch of China Mobile to build the new provincial backbone beyond 100G IDC network, adopting the CE-band 96-wavelength 200G system. This system implements electrical cross-connection to achieve fast connection.

By means of the fast assignment of ROADM system wavelengths, it supports flexible hybrid scheduling of optical and electrical layer services, thereby improving service provisioning and operation efficiency.  Meanwhile, the solution provides multiple routing channels and supports one-hop transmission on the optical layer, enabling lower network latency and mesh network services.

Friday, June 28, 2019

China Mobile demos MU-MIMO Multi-User performance with ZTE

China Mobile demonstrated a 5G MU-MIMO  multi-user performance test based on ZTE's 5G commercial base stations and smartphones at Mobile World Congress Shanghai 2019.

The MU-MIMO test was carried out in China Mobile’s Guangzhou 5G field, employing ZTE's 160M full-band 4/5G dual-mode commercial base station. The base station supports dynamic spectrum sharing, achieving dual-network integration at 2.6GHz, and 16 ZTE commercial mobile phone Axon10 Pro.

The test result showcased that a 5G single cell throughput is over 3.7Gbps, while a single EU downlink data rate is more than 200Mbps. The result is also a four-time increase in network system capacity than that of the SU-MIMO technology. The test footage and data were also transmitted back to China Mobile’s booth at MWC Shanghai in real time from Guangzhou.

http://www.zte.com.cn

Monday, June 24, 2019

ZTE claims 25 5G contracts

ZTE has secured over 25 5G commercial contracts globally and has been already committed to partnerships in the 5G arena with over 60 operators across the globe.

As of June 15, ZTE said it has declared 1,424 families of 5G Standard-Essential Patents(SEP) and patent applications to the European Telecommunications Standards Institute (ETSI), ranking in the global top 3 in terms of the number of such families. The company has filed more than 3,500 5G patent applications.

Monday, April 29, 2019

ZTE posts revenue was RMB 22.202 billion, net profit

ZTE reported first-quarter 2019 operating revenue of RMB 22.202 billion (approximately US$3.295 billion).

Net profit attributable to holders of ordinary shares of the listed company amounted to RMB 0.863 billion.

R&D costs for the first three months amounted to RMB 3.093 billion, accounting for 13.9% of the operating revenue, with the percentage being increased by 4.1%, compared to 9.8% for the same period last year.

ZTE estimated the net profit attributable to holders of ordinary shares of the listed company to be from RMB 1.2 billion to RMB 1.8 billion for the six months ended 30 June 2019.

https://www.zte.com.cn/global/about/press-center/news/2019/201904/20190429e2

Indonesia's Smartfren signs ZTE for 4G & 5G upgrade

Indonesia’s Smartfren has selected ZTE for 4G network expansion and 5G network trials. Financial terms were not disclosed. The agreement was signed by Merza Fachys, President Director of Smartfren, Gandi Sulistyanto, Chairman of Smartfren, Liang Weiqi, President Director of ZTE Indonesia, and Mei Zhonghua, Senior Vice President of ZTE at Indonesia - China Business Forum.

“The agreement this time will definitely bring the partnerships between ZTE and Smartfren to a new level,” said Mei Zhonghua, senior vice president at ZTE. “We are pleased to be chosen for the development of Indonesia's telecommunications infrastructure, so as to improve Indonesia's national broadband network quality.”

Wednesday, March 27, 2019

ZTE returns to profitability in Q1

ZTE reported full-year 2018 operating revenue of RMB 85.51 billion, with net profit attributable to holders of ordinary shares of the listed company amounted to RMB -6.98 billion, which was within the estimated range disclosed in the preliminary announcement of 2018 annual results.

The loss was mainly attributable to the US$1 billion penalty paid to the U.S. government. Net cash flows from operating activities amounted to RMB 1.01 billion for the three months ended 31 December 2018.

R&D spending in 2018 amounted to RMB 10.91 billion, accounted for 12.8% of the operating revenue.

ZTE said it returned to profitability in the first quarter of 2019, estimating net profit attributable to holders of ordinary shares of the listed company to be from RMB 0.8 billion to RMB 1.2 billion. 

Some highlights:

  • In the Wireless Networks, ZTE announced collaborations with 30 global operators in 5G, with the shipment of Massive MIMO base stations reaching 10,000 and more than 400 NFV commercial and PoC cases worldwide.
  • In the Wireline Networks, ZTE see opportunities such as 5G transport, big video, next-generation PON, SDN/NFV.
  • In terms of devices, ZTE has  concentrated on 5G devices, industrial applications and key markets. In the first half of 2019, ZTE’s 5G smartphones will be ready for commercial use. Its 5G flagship smartphone Axon 10 Pro 5G, debuted at MWC 2019, is expected to be first available in Europe and China. Moreover, the company has been committed to promoting serialized 5G products, such as 5G tablets, 5G indoor and outdoor CPEs, 5G mobile hotspots, 5G data devices, 5G vertical industry modules, so as to constantly satisfy consumers’ requirements for 5G intelligent application scenarios.
  • ZTE has cumulatively filed over 73,000 patents globally, with more than 35,000 granted.


Wednesday, February 20, 2019

ZTE intros 5G Fronthaul 200G outdoor OTN platform

ZTE unveiled a 5G fronthaul 200G outdoor OTN product, the ZXMP M721 OD62, for the metro edge. The platform supports 200G connections and employs Flex-O technology to restrict the end-to-end latency within 1 microsecond.

ZTE said its fronthaul solution supports various service access types, including SDH, Ethernet, CPRI and eCPRI to meet the requirements of diversified scenarios. In addition, it supports WiFi debugging, and can automatically implement fast service provisioning, thereby simplifying operation and maintenance. 

“The ZXMP M721 OD62 demonstrates the world-leading 5G fronthaul transport capability of ZTE OTN products, and consolidates the industry-leading position of the full ZXMP M721 series as the aggregation access layer OTN. ZTE’s ZXMP M721 series has got objective assessment from the global industry analyst firm GlobalData. In the Packet-Optical Access (POA) class, it has again been rated as ‘Very Strong’ in recognition of the largest switching capacity, the highest port density, and the smallest footprint in the industry,” said Mr. Wang Taili, General Manager of ZTE Optical Transport Product. 

Thursday, January 17, 2019

China Unicom tests ZTE’s 5G prototype smartphone in Shenzhen trial

China Unicom is testing ZTE’s 5G prototype smartphone in a 5G field trial in Shenzhen. The test is fully verifying the 5G network equipment’s networking capabilities, special services, roaming and interconnection, and the inheritance of existing services in phases, thereby laying a solid foundation for the 5G whole network commercial construction.

ZTE said the Shenzhen testing represents the world's first commercial test field to make the first call in the NSA mode and in compliance with the 3GPP Rel-15.

The Shenzhen test adopts ZTE’s 5G end-to-end solution, including radio access network, core network, transport network and intelligent device, and 5G prototype smartphone.

Thursday, December 27, 2018

MPEG LA prevails in patent case against Huawei and ZTE in Germany

MPEG LA announced today that patent holders in MPEG LA’s AVC/H.264 Patent Portfolio License have enforced verdicts of injunction in German District court (“Landgericht Dusseldorf”) cases finding that Huawei Deutschland GmbH (“Huawei”) and ZTE Deutschland GmbH ("ZTE") infringed patents by their use in mobile phones that implement the AVC/H.264 (MPEG-4 Part 10) Standard.

As a result, Huawei and ZTE must cease and desist from offering in Germany AVC/H.264 compliant devices such as smartphones and tablets that use the enforced patents. In addition, all such products in their possession or the possession of third parties must be recalled and destroyed.

“Although the failure to be licensed has made these enforcements necessary, taking a license under the AVC patents would easily remedy it, and we continue to welcome Huawei and ZTE to do so,” said Larry Horn, President and CEO of MPEG LA.

http://www.mpegla.com

Thursday, October 25, 2018

ZTE jumps right back to profitability

Jumping right back after nearly getting shut down as a result of the U.S. export ban, ZTE Corporation reported net profit of RMB 564 million for the third quarter.

ZTE reported operating revenue of RMB 19.3 billion, and its R&D investment reached RMB 3.47 billion, covering 17.9% of the quarter’s revenue, a year-on-year increase of 6.7%, compared with 11.2% of the same period last year.

Operating revenue of the first nine months ended 30 September 2018 reached  RMB 58.8 billion, and net profit attributable to holders of ordinary shares of the listed company amounted to RMB -7.26 billion.

The company said it strengthened its cost control, and reduced its sales and management expenses on a year-on-year basis.

ZTE also published its Preliminary Announcement of 2018 Annual Results, estimating that net profit attributable to holders of ordinary shares of the listed company for the year of 2018 amounted from RMB -7.2 billion to RMB -6.2 billion.

Thursday, August 30, 2018

ZTE counts its losses for 1H18, renews focus on 5G

ZTE Corporation reported revenue of RMB 39.434 billion for the first six months of 2018, down 27% from RMB 54.010 for the same period in 2017.

For the six months, ZTE's net profit attributable to holders of ordinary shares of the listed company amounted to RMB-7.824 billion, representing year-on-year decline of 441.24%. Basic earnings per share amounted to RMB-1.87, which reflected mainly the company’s payment of the US$1 billion penalty to the U.S. government.

ZTE's operating revenue from the domestic market amounted to RMB25.746 billion, accounting for 65.29% of the Group’s overall operating revenue, while international sales amounted to RMB13.688 billion, accounting for 34.71% of the total.

ZTE's operating revenue for carriers’ networks, government and corporate business and consumer business amounted to RMB23.507 billion, RMB4.433 billion and RMB11.494 billion, respectively.

Management's commentary included the following:  "Looking to the second half of 2018, the Group will welcome new opportunities for development, given rapid growth in the volume of data flow over the network and the official announcement of the complete fully-functional 5G standards of the first stage. Specifically, such opportunities will be represented by: the acceleration of 5G commercialisation with the actual implementation of trial 5G deployment backed by ongoing upgrades of network infrastructure facilities; robust demand for smart terminals; as well as an onrush of new technologies and models with AI, IOT and smart home, among others, providing new growth niches. "

"In the second half of 2018, the Group will step up with technological innovation and enhance cooperation with customers and partners in the industry with an ongoing focus on high-worth customers and core products. In the meantime time, we will improve our internal management by enhancing human resources, compliance and internal control to ensure our Group’s prudent and sustainable development."



Monday, August 13, 2018

U.S. Defense Authorization Act bans Huawei and ZTE from government purchase

The John S. McCain National Defense Authorization Act for FY 2019, which was signed into law by President Trump, officially prohibits the  U.S. government from purchasing telecommunications equipment produced by Huawei Technologies, ZTE Corporation, or any of their affiliates.  The U.S. government is also prohibited from using telecommunications or video surveillance services from any entities using such equipment.

Earlier versions of the legislation had threatened more severe action against Huawei and ZTE but were later removed from the bill.


Sunday, July 29, 2018

Caixin: The Wake-Up Call for China’s Chip Industry

The near-death experience of ZTE due to the 88-day ban imposed the U.S. Department of Commerce is a wake-up call for China's semiconductor industry, according to an article in the business journal Caixin.

The article the foreign joint venture model, Chinese investments/acquisitions of tech companies abroad, and government-supported initiatives to build a strong, domestic ecosystem for semiconductor design and fabrication.

https://www.caixinglobal.com/2018-07-29/the-wake-up-call-for-chinas-chip-industry-101309608.html

Sunday, July 15, 2018

ZTE begins recovery, posts huge 1H loss

ZTE confirmed that it has resumed business operations following the lifting of the export ban of U.S. components and technology to the company imposed by the U.S. Department of Commerce.

ZTE paid US$1.0 billion in civil monetary penalties to the U.S. and placed an additional US$0.4 billion in escrow as a suspended penalty.

ZTE reported a preliminary loss of between RMB 7 billion (US$1.06 billion) to RMB 9 billion (US$1.345 billion) for the first half of 2018. On a per-share basis, this amounts to a loss of RMB 1.67–2.15 per share.

In June, ZTE said it was pursuing a 30 billion yuan ($4.9 billion) line of credit from Bank of China and a separate $6 billion credit line from China Development Bank.

Sunday, July 8, 2018

ZTE names XU Ziyang as new president

ZTE confirmed the appointment of Mr. Xu Ziyang as the President of the company, and the appointments of Mr. Wang Xiyu, Mr. Gu Junying, and Ms. Li Ying as Executive Vice President of the company. Ms. Li Ying will also serve concurrently as Chief Financial Officer.

Mr. Xu Ziyang (徐子陽), born in 1972, graduated from the University of Electronic Science and Technology of China with a bachelor’s degree in engineering. He joined ZTE in 1998 and served as a programmer, section chief of GSM product line development department of Nanjing Research and Development Center, head of PS development department, deputy general manager of core network, and product general manager of core network.  From 2011 to 2013, Mr. Xu acted as general manager of MKT fourth branch of the company in charge of European and United States systems products. From 2014 to 2016, Mr. Xu acted as general manager of ZTE Services Deutschland Gmbh. Since 2016, Mr. Xu has been acting concurrently as assistant to the President of the Company and product general manager of the CCN core network product line products of wireless operation department of the company.

ZTE emphasized that Mr. Xu has not been subject to any penalties by China Securities Regulatory Commission or any other disciplinary sanctions by any other stock exchange. Nor has Mr. Xu been the subject of any judicial investigations.

Thursday, July 5, 2018

U.S. provides a temporary lift on exports to ZTE

The U.S. Department of Commerce's Bureau of Industry and Security (BIS) agreed to temporarily lift export restrictions to ZTE that were imposed on the company on 15-April-2018.

In a statement dated 02-July-2018, the BIS grants temporary authorization to engage in transactions with ZTE until 01-August-2018.

In June, at the urging of President Trump, BIS announced a deal with ZTE to lift the export restrictions in exchange for ZTE agreeing to pay a $1 billion fine and place an additional $400 million in suspended penalty money in escrow. ZTE has also replaced its entire board of directors and senior leadership team.

The ban on exports of U.S. technology to ZTE remains a hot topic in Washington. The U.S. Senate included a continued ban on exports to ZTE in a spending authorization bill for the U.S. Department of Defense. The U.S. House of Representative did not in its version of the legislation. The bills must now be reconciled before being sent to the President.



U.S. Senate's Defense Legislation hits ZTE






The U.S. Senate voted 85 to 10 to approve a $716 billion defense spending authorization bill that includes a provision extending the restriction on the export of U.S. technologies to ZTE. The provision is a rebuke to President Trump's decision to lift the ban against exports to ZTE. The Senate version of the defense spending authorization bill must be reconciled with the House version, which prohibits the federal government from purchasing ZTE products,...

ZTE resumes trading, seeks loan from Chinese banks





For the first time since April 16th, shares of ZTE resumed trading on the Hong Kong Stock Exchange. The shares were valued significantly lower than the previously listed price. ZTE also announced its intention to seek a 30 billion yuan ($4.9 billion) line of credit from Bank of China and a separate $6 billion credit line from China Development Bank. ZTE also informed the market that it has agreed to the settlement with the U.S. Department of Commerce...

U.S. reaches deal to save ZTE





The U.S. Department of Commerce announced a deal to allow the export of U.S. components and technology to ZTE, enabling the company to resume operations. Under the deal,  ZTE must pay $1 billion and place an additional $400 million in escrow. ZTE also agreed to certain provisions allowing monitoring of its compliance with U.S. export control laws. “Today, BIS (Bureau of Industry and Security) is imposing the largest penalty it has ever levied...

FWD: The death of ZTE

Zhongxing Telecommunication Equipment Corporation (ZTE), one of the world's largest suppliers of network infrastructure products, informed the Hong Kong Stock Exchange that "the major operating activities of the Company have ceased". 

If the notice means what we think it means, then ZTE is dead.

It took only 3 weeks from the day that the U.S. Commerce Department' Bureau of Industry and Security (BIS) issued its order prohibiting companies or individuals from participating in any way in an export transaction with ZTE for this multinational giant based in Shenzhen to collapse. I'm not sure there has been any other corporate collapse in the networking sector of this magnitude and in this accelerated time frame. The nearest comparison would be the collapse of Nortel in 2009, but that took years to occur rather than just weeks.

ZTE's website has already started to disappear. Many product, technology and news archive pages are now gone.

The most proximate reason for the death of the company is that without new deliveries of chipsets and optical components from U.S. vendors, the manufacturing lines for ZTE must have already come to a halt, leaving the company unable to ship products. Just-in-time manufacturing probably means that the company has insufficient inventory to sustain operations during a protracted appeal or legal fight with the U.S. Department of Commerce. More importantly, if the market has lost confidence, the sharks smell blood, and normal operations become impossible.

There will be a scramble amongst investors, creditors, employees, competitors, suppliers, and customers to secure whatever value remains in the organisation. There should be plenty.

Salvaging the good bits

First, there is a huge installed base of ZTE equipment worldwide in carrier networks, in data centres, in enterprise IT centres, and in home networks. The value of this equipment could be in the tens of billions if we take a cumulative count of sales over the last four years. These networks, which belong to the customers and their lenders, will need to be supported.  There is ongoing business here for someone.

ZTE holds the No.1 or No. 2 markets share position on many of the core infrastructure projects of the big three carriers in China -- China Mobile, China Telecom, and China Unicom.

All of ZTE's product segments were growing. Here are the 2017 annual growth rates:

  • Carrier networks  8.3%
  • Gov't and corporate  10.4%
  • Consumer 5.2%


Outside of China, ZTE has many current sales contracts and open purchase orders for new equipment, with good prospects of upcoming fibre broadband, 4G, 4G, and core network projects. 

ZTE has a very extensive telecom equipment portfolio, covering every sector of wireless networks, core networks, access & bearer networks, services and terminals. 

ZTE has been listed on the Shenzhen Stock Exchange since 1997 and on the Hong Kong Exchange since 2004. Trading has been suspended since April 16 and so there is no way to know quite yet if the shares are now worthless. The company's balance sheet at the end of 2017 showed RMB 31.647 billion in current assets, and the company's most recent statement said it was conserving cash.

ZTE has abundant in-house and contracted production facilities capable of manufacturing large volume of smartphones, customer premise equipment, and carrier infrastructure products. 

ZTE has many current and next-generation product designs using the latest silicon from U.S., Japanese, Korean, Taiwanese and other international suppliers. The product designs could be sold to other equipment suppliers.

ZTE has a considerable patent portfolio. ZTE claims to amongst the most prolific corporate patent filers in recent years. As of 30-June-2017, ZTE Group 68,000 patents, including 29,000 granted global patents.

As of mid-2017, the company was operating 20 R&D centres in China, the United States, Sweden, France, Japan and Canada, as well as more than 10 joint innovation centres established in association with leading carriers.

There is a talented pool of 74,773 employees (including 58,940 as employees of the parent company), with an average age of 33. Many of these employees have deep subject matter expertise, the vast majority of whom had nothing to do with the business decisions that got ZTE into trouble. 

ZTE was gearing up for a big play in 5G

At this year's  Mobile World Congress in Barcelona, ZTE captured the “Best Technology Innovation for 5G" award for its end-to-end vision encompassing the radio access network, the core network, bearer platforms, custom 5G silicon and CPE terminals. As with other suppliers, many of these are “works in progress” rather than commercially deployable solutions right now.

ZTE's has pushed hard on Massive MIMO, the antenna technology which has been shown to improve spectral efficiency up to 8 times.

It has been pioneering a multi-user shared access (MUSA) technology to effectively increase the number of connections served, and thereby enable support for scenarios involving mass connectivity with low power consumption. This could be extremely useful in very crowded areas, such as subway systems, when everyone is using their smartphone. The MUSA technology works by allowing high overload and eliminating scheduling operations, thereby increasing the number of connections by between 3- and 6-fold. It uses advanced spread spectrum sequence and SIC technology to simplify terminal implementation and help reduce energy consumption.

In the network core, ZTE is ready to commercialize end-to-end 5G network slicing. Its Cloud ServCore platform implements lightweight micro-service components to enable the network slices to operate independently and with easy scalability. This will allow IoT applications, for instance, to scale smoothly and without impacting other network slices.

ZTE is also readying a 5G Flexhaul bearer solution based on next-gen FlexE technology. Part of this vision to achieve a unified bearer network for 3G / 4G / 5G traffic. ZTE says its 5G Flexhaul achieves end-to-end protection switching time of less than 1ms, as well as single node forwarding latency of less than 0.5μs.




ZTE was a $20 billion company on the rise

Prior to receiving the death sentence for sanctions violations and lying to the U.S. government during a probationary period, ZTE was profitable and on a $20 billion per year sales run rate.

For Q1 2018, the company reported revenue of RMB 28.879 billion (US$5.548 billion), up 12% over the same period in 2017. Net profit after extraordinary items attributable to holders of ordinary shares of the listed company amounted to RMB 1.368 billion (US$216 million). For the full year 2017, ZTE reported operating revenue of RMB 108.82 billion, 7.49% higher than a year earlier,  

Net profit for 2017 was reported at RMB 4.55 billion, an increase of 293%. Net cash flow from operating activities for 2017 was approximately RMB 6.78 billion, about 28.88% year-on-year growth. This was a quite a recovery from 2016, when revenues grew just 4% and profits were lower. With booming handset sales in China, India and other developing markets, along with good prospects for 5G, things were looking pretty good for ZTE, until its troubles with the long-running exports violation case came to a head.

Big fine in 2017

ZTE's 2017 results were impacted by troubles with the U.S. government. In March 2017, ZTE made penalty payments of over US$1.19 billion to the U.S. government-- this too for the case involving the shipment of U.S.-origin technology to Iran during the period of economic sanctions. ZTE plead guilty in the case and paid the fine. It also agreed to a number of other conditions, which were not fulfilled, according to the U.S. Commerce Department, or which ZTE subsequently lied about. 

Huawei as the beneficiary? 

ZTE generates about 40% of its revenue abroad. 

We can surmise that many of the large carrier projects that ZTE currently has underway internationally will have been funded by the Bank of China,  the China Development Bank (CDB), or other government-backed, export/import financial institutions. These carrier customers are facing the prospect of suspended or canceled projects. This presents an opportunity for other network vendors to step in and capture the business. 

However, the customer would need to secure another funding source. Huawei is the most likely to be the ZTE replacement, especially if the Bank of China or CDB were to transfer project loans on their behalf. Ericsson, Nokia, Samsung and others also have an opening to entice these ZTE carrier customers with their offerings.

But what if Huawei is next?

However,  it is conceivable that the Trump administration will ratchet up the pressure on Huawei, for instance by extending all of parts of the ZTE export ban to them, or by persuading other governments to block Huawei as has been done in the U.S.. Many analysts expected that the ZTE ban was a bargaining chip in the recent, first round of trade negotiations between the U.S. and China. There was, and perhaps continues to be, hope that the order would be rescinded after the trade talks. This did not happen. Perhaps the trade tensions will get worse, with Huawei coming under pressure next.

With this possibility at hand, some large carriers in countries such as Japan, Germany or Singapore, may rethink their future plans with Chinese equipment vendors in general on critical projects so as not to face supply disruptions like we now see with ZTE. In Germany, Deutsche Telekom recently announced a 5G pilot deployment in Berlin using Huawei equipment. In the U.S., T-Mobile is prohibited from using Huawei as a supplier. With T-Mobile now seeking to merge with Sprint, U.S. regulators conceivably could require the German parent company to remove all Huawei gear from all of its networks as a condition for approving the merger. 

In other countries, there will be other geopolitical considerations. In Russia, ZTE has just clinched a 70% share of the first stage of  Rostelecom's the access network modernization project. ZTE's Multi-Service Access Network (MSAN) product delivers VDSL. Rostelcom is currently testing G.vectoring and G.fast for deployment in a second stage of its upgrade project. Rostelecom, of course, is Russia's leading broadband and pay-TV provider with over 12.7 million fixed-line broadband subscribers and over 9.7 million pay-TV subscribers, over 4.7 million of which are subscribed to its IPTV service. Given the need for Rostelcom to complete this network upgrade successfully, on-time and on budget, they will look for other suppliers.. but probably not from the U.S.

In India, ZTE is now a major supplier of low-cost smartphones and optical transmission gear. In October 2017, ZTE announced a 100G WDM Backbone Network Project and metro area network (MAN) construction contract with Idea Cellular, the third largest mobile operator in India with 189 million subscribers. With this deal, ZTE’s OTN optical transport platform captured a 95% share in the metro optical backbones that carry Idea Cellular’s traffic. ZTE has previously disclosed major contracts with Bharti Airtel as well. This success comes despite some protectionist voices in India warning against Chinese suppliers for critical network infrastructure.

Other recent contract wins include the Ooredoo Group, which serves 164 million customers across the Middle East, and South Africa based MTN. For Ooredoo Group, ZTE was expected to supply end-to-end networks, applications, and terminals in preparation for a 5G launch. MTN was also looking at deploying ZTE’s 5G NR radio access, 5G virtualized network slicing, carrier DevOps and container-based vEPC, and 5G Flexhaul bearer network.

The ZTE effect on suppliers

For those companies who were supplying chipsets, optical components, memories, display technologies, protocol stacks, etc. to ZTE, there will be a waiting game to see who takes up the slack. We can presume that the size and growth of the market will remain the same before and after this incident. If ZTE doesn't supply that core router, someone else will. 

What comes next?

The ZTE statement about ceasing normal activities holds out a glimmer of hope that the U.S. government might hear an appeal and grant a reprieve. Last week, U.S. trade negotiators visited China. Obviously, no deal occurred or ZTE would not have made its statement. 

Whatever comes next, it better happen quickly because sales contracts and talented employees will not stick around to what eventually emerges. The best people and ideas will move on to competitors or new ventures.

The most likely outcome is that ZTE individual business units are sold off, spun out, or otherwise reorganised into new corporate entities. In other words, the same cast of characters with the same products but operating under a new name.

Monday, June 18, 2018

U.S. Senate's Defense Legislation hits ZTE

The U.S. Senate voted 85 to 10 to approve a $716 billion defense spending authorization bill that includes a provision extending the restriction on the export of U.S. technologies to ZTE. The provision is a rebuke to President Trump's decision to lift the ban against exports to ZTE.

The Senate version of the defense spending authorization bill must be reconciled with the House version, which prohibits the federal government from purchasing ZTE products, but not reimpose the export ban on the company.

Commerce Secretary Wilbur Ross is believed to be negotiating on Capitol Hill to ensure that the ban against ZTE does not become part of the final bill.

Wednesday, June 13, 2018

ZTE resumes trading, seeks loan from Chinese banks

For the first time since April 16th, shares of ZTE resumed trading on the Hong Kong Stock Exchange. The shares were valued significantly lower than the previously listed price.

ZTE also announced its intention to seek a 30 billion yuan ($4.9 billion) line of credit from Bank of China and a separate $6 billion credit line from China Development Bank.

ZTE also informed the market that it has agreed to the settlement with the U.S. Department of Commerce and will pay civil monetary penalties totalling US$1.4 billion, including a lump sum payment of USD1 billion to
be paid within 60 days of the issuance of the 8 June 2018 Order, and an additional suspended penalty of US$0.4 billion to be placed within 90 days of the issuance of the 8 June 2018 Order.

ZTE also listed the following conditions imposed by the order.

1. A new denial order (the “New Denial Order”) for a period of ten years from the issuance of the 8 June 2018 Order (the “Probationary Period”) that would, among other things, restrict and prohibit ZTE from applying for, obtaining, or using any license, license exception, or export control document, and participating in any way in any transaction involving any commodity, software, or technology that is subject to the U.S. Export Administration Regulations (the “Regulations”) shall be imposed, but the New Denial Order shall be suspended during the Probationary Period, and thereafter be waived subject to ZTE's compliance with the Agreement
and the 8 June 2018 Order.

2. ZTE shall replace the entire boards of directors (the “Boards of Directors”) of both the Company and ZTE Kangxun within 30 days of the issuance of the 8 June 2018 Order. Within 30 days of replacing the Boards of Directors, ZTE shall create special audit/compliance committees under the Boards of Directors composed of three or more independent members of the new Boards of Directors. The chair of the Boards of Directors can be a member of the committee but cannot chair the committee.

3. ZTE shall terminate all current members of the senior leadership of both the Company and ZTE Kangxun at or above the senior vice president level as well any executive or officer who participated in, oversaw, or was otherwise responsible for the conduct described in the proposed charging letter issued by BIS in March 2017 or the 15 April 2018 Denial Order, within 30 days of the issuance of the 8 June 2018 Order, and prohibit the re-hire of those employees by ZTE and any of its subsidiaries or affiliates. ZTE will promptly report to BIS on its implementation of this term. BIS, at its sole discretion, may consider exemptions to this term.

4. ZTE shall retain at its expense an independent special compliance coordinator (“SCC”) within 30 days of the issuance of the 8 June 2018 Order to coordinate, monitor, assess, and report on compliance by ZTE and its subsidiaries or affiliates worldwide with the U.S. Export Administration Act of 1979, the Regulations, the Agreement and the 8 June 2018 Order during the Probationary Period. The SCC will report to the chief executive officer and the Board of Directors of ZTE and to BIS, equally.

5. ZTE shall complete and submit nine audit reports of its compliance with U.S. export control laws. At the conclusion of the term of the independent compliance monitor created according to the agreement signed between the Company and the United States Department of Justice (as disclosed in the announcement of the Company dated 8 March 2017) and any related court orders, the SCC will be responsible for conducting the six remaining audit reports. 

6. ZTE shall provide extensive training on applicable export control requirements to its leadership, management and employees, and the leadership, management and employees of its subsidiaries, affiliates, and other entities worldwide over which it has ownership or control.

Thursday, June 7, 2018

U.S. reaches deal to save ZTE

The U.S. Department of Commerce announced a deal to allow the export of U.S. components and technology to ZTE, enabling the company to resume operations.

Under the deal,  ZTE must pay $1 billion and place an additional $400 million in escrow. ZTE also agreed to certain provisions allowing monitoring of its compliance with U.S. export control laws.

“Today, BIS (Bureau of Industry and Security) is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Secretary Ross. “We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. technology as well as collect the additional $400 million in escrow."

Last year, ZTE paid $892 million in penalties to the U.S government in a March 2017 settlement agreement.

Trading of ZTE shares in Hong Kong has been suspended since April 16th. The company halted major operating activities on May 9.

Monday, May 28, 2018

Trump announces deal to lift export ban on ZTE

President Trump announced a deal to save ZTE by lifting the current export ban on U.S. products to the company. In exchange, ZTE is to pay a $1.3 billion fine, make changes to its management, and hire U.S. compliance officers.

As of Monday, there has not an official statement or posted order by the U.S. Department of Commerce lifting the ban.

The deal continues to face opposition in Congress, including from Senator Marco Rubio, a Republican from Florida, who is threatening legislative action to block the deal.

Trade negotiations between the U.S. and China are expected to resume in early June.



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