ZTE swings to 2012 loss as margins narrow

103

Lacklustre spending from operators causes Chinese vendor’s revenue to slip 2.4%.

Chinese telecommunications equipment supplier ZTE Corp. said Wednesday it swung to a net loss in 2012, citing a revenue decline and lower margins for its business contracts.

ZTE, which supplies network equipment to mobile carriers and also sells smartphones, reported a net loss of 2.84 billion yuan ($457 million) for last year, compared with a net profit of 2.06 billion yuan for 2011, due to “a larger number of low-margin contracts in Africa, South America, Asia and the domestic market.”

Revenue fell 2.4% to 84.22 billion yuan from 86.25 billion yuan a year earlier. “There was a slowdown in investments in equipment by the global telecommunications industry in 2012, although performances varied from region to region,” ZTE said in a statement.

The 2012 result was in line with expectations, with the company having warned in January that it would likely post a loss of between 2.5 billion yuan and 2.9 billion yuan.

ZTE also said in January that it expects a profit for the first quarter of this year, helped in part by the sale of its 81% stake in unit Shenzhen ZNV Technology Co., which makes surveillance systems.

The business environment remains tough for ZTE as telecom operators world-wide remain reluctant to raise investments in network equipment, while fierce price competition in the smartphone market continues to weigh on its handset business.

Last year, ZTE’s U.S. business was dealt a setback after a U.S. congressional report cited concerns that equipment from ZTE and fellow Chinese telecom equipment supplier Huawei Technologies Co. posed a national-security threat and could be used to spy on Americans. ZTE and Huawei denied the allegations.