ZTE shares fall as company axes 3,000 jobs

(Image Credit: iStockPhoto/Woodkern)

Shares in telecommunications equipment manufacturer ZTE have dropped after the company slashed 3,000 jobs amid declining business investment and struggles against competitors in its smartphone business. 

With most 4G networks approaching completion, and 5G yet to arrive, ZTE is suffering from a decline in business investment from telecoms operators. Even when 5G technology begins to roll-out, likely around 2018, capital will not be as much as for 4G as not as many infrastructure upgrades will be required. 

While rivals such as Huawei have their consumer smartphone business to fall back on when business investment dries up, ZTE's has declined by double digits while the worldwide smartphone market has grown 1 percent in terms of shipments. Part of this is due to increasing competition from lower-tier Chinese smartphone brands such as Vivo and Oppo. 

Completing the trio of bad news for ZTE which led to today's job cuts is the sanctions which the US Commerce Department hit the company with – in some of the 'toughest ever' US export restrictions. This was in response to allegedly breaking sanctions against Iran. A temporary reprieve on the curbs has since been issued. 

The job losses represent around five percent of ZTE's workforce and cut approximately a fifth of positions in the company's handset business. 

As a result of the decision, shares in ZTE have dropped. The company's Shenzhen-listed shares dropped almost four percent, while its Hong Kong-listed shares dropped over three percent. 

What are your thoughts on ZTE's situation? Let us know in the comments.

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