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ZTE hopes to make a comeback

By Shen Jingting  (China Daily)

14:43, April 19, 2013

ZTE's mobile phone display at a telecommunications trade show in Beijing. The company booked a net loss of 2.84 billion yuan ($459 million) last year, from a net profit of 2.06 billion yuan in 2011. [Photo / China Daily]

Chairman expects revenue growth of 10 percent over next 5 years

ZTE Corp, the nation's second-largest telecom equipment vendor, is likely to return to profit growth this year, the company's chairman said.

Based on an improved telecom industry environment and tightened internal controls, ZTE forecast revenue growth will average 10 percent annually over the next five years, Hou Weigui, ZTE's chairman, told China Daily.

"We have seen an explosive growth of data traffic recently, thanks to the quick development of smart devices. This in turn creates a huge and consistent demand for powerful telecom gear," Hou said.

Hou said he expects network infrastructure spending by European telecom operators to gradually pick up, and demand from carriers in Asia and Africa to also gain momentum.

More good news came from the domestic market. Chinese government officials expressed clear signals to support fourth-generation mobile network construction in the country.

"If the government hands out 4G licenses, it will certainly be a boost for ZTE's business," Hou said.

It is easy to see how attractive the Chinese 4G market is after China Mobile Ltd, the nation's largest telecom operator, announced its capital spending would jump 49 percent year-on-year to 190.2 billion yuan ($30.5 billion) in 2013. More than half of the company's spending on networks - 42 billion yuan - will go on 4G projects this year.

Hou's comments were echoed by Ericsson Chairman Leif Johansson, who earlier this month said that he saw a more stable and healthy market for network equipment in 2013.

"ZTE has to learn lessons from experience" to catch opportunities, Hou said. He said the company will focus on improving management of profitable contracts and delivering good results.

Last year was a tough year for Shenzhen-based ZTE, as it posted its worst annual financial report in 15 years. ZTE booked a net loss of 2.84 billion yuan last year, from a net profit of 2.06 billion yuan in 2011.

Its cross-town rival Huawei Technologies Co Ltd, on the other hand, recorded a 32 percent jump in net profit to 15.38 billion yuan during the same period.

Meanwhile, ZTE faced challenges in one of the world's biggest telecom markets - the United States, where the company was blocked from doing business with local carriers because of "national security concerns".

Hou said he has no confidence in breaking the ice in the US telecom network equipment market in the near future. However, he expressed optimism about increasing mobile phone sales in the country.

In 2012, ZTE's revenue in the United States reached a record $1 billion, 90 percent of which came from mobile phone sales.

"Our goal for the North American market is 10 billion yuan in revenue this year," Hou said.

ZTE established a North American Business Group earlier this year, which will report directly to its core management and is headed by Cheng Lixin, senior vice-president of ZTE and the CEO of ZTE (USA) Inc.

It became the fifth-largest terminal vendor in the US by shipments last year, with a market share of about 5 percent, behind Samsung Electronics Co Ltd, Apple Inc, LG Electronics and Motorola Inc, said He Shiyou, ZTE's executive vice-president.

ZTE did not even crack the top 10 in the US mobile phone supplier market two years ago, the company said. All of the major US telecom carriers, including Verizon, AT&T and T-Mobile, have cooperated with ZTE in selling its handsets.

Hou said he hopes the terminal business will contribute half of ZTE's total revenue by 2015.

"The current major task for ZTE's mobile phone department is to increase mid-to high-end smartphones and lift our branding," he said.

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