China’s second-largest 5G equipment maker ZTE is continuing its recovery from a disastrous 2018 with a profitable second quarter. The Shenzhen-based company attributed its positive results to 5G equipment sales.
Why it matters: ZTE recorded RMB 607 million ($85 million) in profits during the quarter ended June 30 as it works to turn around losses of around RMB 7 billion in 2018 following US sanctions and a $1.4 billion fine over its business with Iran.
- ZTE recorded losses of RMB 2.4 billion in the same period a year ago.
- The company has been working against tough competition in the 5G landscape. China’s market is dominated by Huawei and other players such as Nokia and Ericsson are competing for contracts worldwide.
Details: ZTE earned RMB 22.4 billion in revenues in Q2, more than doubling the RMB 11.9 billion in revenue from the same period a year ago.
- Profits from the company’s first half of the year totaled RMB 1.47 billion (around $206 million) against a net loss of RMB 7.8 billion the same period a year ago.
- The company forecasted profits in the range of RMB 3.8 billion to RMB 4.6 billion for first nine months of 2019, ending on September 30.
- ZTE said that it is focusing on technologies that will boost its 5G business, such as operating systems, databases and chips.
Context: The telecom giant was hit hard by US sanctions in 2018, and continues to face aggressive lobbying from Washington, which wants to exclude Chinese companies from the development of its 5G networks.
- ZTE halted a significant part of its operations for around four months beginning in April 2018.
- It lost around half of its share value in the same year and faced liquidity problems to the point that it sold off property holdings in its home city of Shenzhen.
- Despite Washington’s attempts to thwart international telecom operators from using Chinese products in the development of 5G networks, ZTE said that it had signed 25 commercial 5G contracts with global operators in the first half of the year. Huawei announced that it had signed 50.
- Prior to US sanctions, ZTE posted record profits of RMB 1.69 billion in the first quarter of 2018.