ZTE flies on local 3G, but internationally it's flat
Published: 20 August, 2009
Chinese handset and network builder ZTE recorded revenues up for the first half of 2009 at a record RMB 27.71 billion ($4 billion) up 40.4% against the same period of 2008. Net profit was RMB780 million ($114 million)
ZTE has ramped up on the back of the rapid build out of 3G networks in China, and reported revenues of RMB14.95 billion ($2.2 billion) in the domestic market, which is up a colossal 111.7%, in deals with China Unicom and China Telecom. The company said it did particularly well in the major coastal provinces of China, which are both more prosperous and which require more complex and expensive networks.
Internationally ZTE has revenues of RMB12.76 billion ($1.86 billion), and this told a totally different story, up by only 0.7%, and gives a better long term view on how well the company will do once China's 3G network build is complete in a few years. Much of this work was down to GSM network builds in developing countries, along with bandwidth upgrades.
But ZTE's handset business managed to grow by a creditable 29.8% at a time when other handset builders are falling back, with the exceptions of Korean's LG and perhaps Taiwan's HTC. ZTE's telecommunication software systems and services was up 29.2%. The company said that it usually puts about 10% of its revenue into R&D, but that this year R&D costs grew by 58.2%, ahead of revenue growth. This shows the direction ZTE will have to grow in if it wants to move away from its reputation as a cheap handset and network builder, into more advanced products.
Mr. Hou Weigui, Chairman of ZTE, said, "the Group will seek to consolidate its businesses with the three leading PRC carriers on the back of its initial market shares in the domestic 3G sector. Meanwhile, the Group will seek to maintain its competitive edge in the international market and focus on large, populous countries as potential emerging markets. We will also strengthen cooperation with key strategic carriers in high-end markets such as Western Europe and North America to unfold further opportunities for cooperation with top-tier global carriers, in response to upgrades of communications technologies taking place in developed countries/regions and changes in the competitive scenario for global suppliers."
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