ZTE hopes Verizon deal will lead to bigger things
Sells low end Salute to tier one carrier, as western revenues grow by 45%
Published: 20 August, 2010
READ MORE: Financial | ZTE | Handset
ZTE announced two milestones on its road to reducing dependence on its home market and becoming a big name in the US and Europe. In its second quarter, it said its revenues from those regions rose by 45%, while it crowed over its first handset deal with a US tier one carrier, Verizon Wireless.
The Chinese handset maker has seen significant growth in volumes over the past two years, entering the top five vendors by some analysts' calculations at the end of 2009. Most of this has come in emerging markets and in the featurephone, white label and CDMA segments, but it now aims to increase its margins and brand awareness with a push into smartphones.
It announced its first Android models last year and has signed some deals with European carriers for higher end, ZTE-branded devices. Most have been with tier two carriers, but its flagship X760 touchscreen gained a deal with Bouygues Telecom of France, the first time the Chinese player got its own brand onto a French phone (though it offers 15 white label models in the country). The product now sells in 20 countries through 24 carriers including T-Mobile and Vodafone in certain European territories. Meanwhile, 3 Group is offering the 3G F102 midrange model in the UK, Ireland and Scandinavia and MetroPCS has tapped ZTE for a CDMA model.
The Verizon deal is not for an Android device but for a low end phone, the Salute, but ZTE officials were confident that it would be an entry point to get its smartphones into the carrier. "We're very excited and proud of this major step for ZTE," said Jeff Ji, executive VP of ZTE USA. "We're trying to dramatically increase the US market. We hope this will be the first of many deals with tier one operators as we launch a wider range of devices." ZTE hopes to take advantage of the trend for smartphone capabilities to reach into lower end markets. "The smartphone doesn't have to be high end," Ji said. "It can be mid-tier, or can be low end, which would make it accessible to the mass market."
The Salute costs $20 after rebate and contract, and is positioned as "an upgrade to the basic phone", with a slider format, web browser, 1.3-megapixel camera, email and social networking clients, and support for Verizon Brew content.
Meanwhile, ZTE said its operating revenue increased by 10.9% year-on-year to $4.52bn for the six months ended June 30 2010. Revenue contribution from the European and US markets amounted to 18% of the total, an increase of 45%. Net profit grew by 12% to $129.143m. Total non-Chinese revenue was up 19.6% to $2.25bn or 49.65% of the total, very close to ZTE's goal of reducing homegrown revenues to less than half. Part of the shift is because of the slowdown of Chinese 3G procurements and the firm said "revenue from Asia declined due to an incident relating to the safety inspection of communications equipment in India".
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