ZTE expects big losses in 2012

Chinese telecom gear manufacturer ZTE Corp expects to register a full-year net loss of up to 2.9 billion yuan ($466 million) in 2012, from a net profit of 2.06 billion yuan in 2011. But the company said it may report a profit again in the first quarter of this year.

In its preliminary results announcement sent to China Daily, ZTE said it estimated net losses of 2.5 billion to 2.9 billion yuan for the financial year ended Dec 31.

The company attributed the losses to some delayed projects, the recognition of earlier lower-margin contracts and decreases in revenue from terminals.

Officials from ZTE said the company is actively reviewing its operations and hopes to reverse the situation.

"ZTE is steadfastly executing its comprehensive strategic review begun last year to sharpen its focus on key products and markets, and strengthen cash flow management," the announcement said.

ZTE has established an internal expert team, directed by an executive vice-president, to work on reducing losses, according to a ZTE official who asked not to be named.

The company also stemmed the growth in employee numbers and applied a strict human resources assessment system. ZTE's staff number dropped by 9 percent in 2012 from the previous year, China Business News reported.

Due to its strategic realignment efforts, ZTE may swing to a net profit in the first quarter this year. The company said it recently had positive net cash flow from operations on more profitable contracts, investment gains and higher sales collection.

Though the global telecom industry is in a flat-growth period, there are still big opportunities for companies like ZTE to explore.

"Global telecom carriers are likely to make consistent investment in network construction and upgrades," said Xiang Ligang, a Beijing-based industry insider.

ZTE itself has also sensed an opportunity.

"Data traffic volumes on networks will increase exponentially, prompting operators to invest in higher-bandwidth networks," the company said.

ZTE has more than 100 commercial and trial LTE networks deployed globally, with an industry-leading position in dual-mode 4G TD-LTE and FDD-LTE combined networks.

It is also the world's fourth-largest smartphone manufacturer, rising from ninth position in 2011, according to the company.

He Shiyou, executive vice- president of ZTE, said the company aims to challenge dominant rivals such as Samsung Electronics Co and Apple Inc.

"People always regard Chinese brands as low-end product vendors, but ZTE strives to offer innovative mid- to high-end smartphones and win customers in the United States, China, Japan and European markets," He said.

(China Daily 01/22/2013 page15)