ZTE expects $1bn of losses following turbulent year
Chinese telecoms vendor ZTE is expecting to post a loss of $1bn (£780m) following a turbulent year which led to a temporary suspension of its operations.
It’s fair to say ZTE will be looking to put 2018 behind it after being forced to suspend its operations following a ban in the US. The ban has since been lifted, but not before paying a huge fine.
The ban was implemented after ZTE was found to break US economic sanctions banning the sale of equipment to North Korea and Iran. ZTE estimated the resulting suspension of its operations cost it around $3 billion.
ZTE said in an exchange filing back in May:
“As a result of the Denial Order, the major operating activities of the company have ceased,”
As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations.”
Following the payment of a $1.4 billion penalty and promise to replace its board, ZTE has since had its US ban lifted.
With the news that ZTE would once again be allowed to operate in the US market, company shares climbed as much as 15 percent.
Wu Youwen, Analyst at Zhongtai Securities, wrote in a research note:
“This will push investors to reconsider their overly pessimistic expectations.
The communications sector had led market declines since the start of the year. It’s fully reflected concerns about shrinking capital expenditure, the ZTE issue. and China-US relations.”
The decision to reverse ZTE’s ban faced accusations of corruption. Experts say the speed in which 34 trademarks related to Ivanka Trump’s business in China were approved, mere days before the ZTE ban was overturned, was unusual.
Chinese telecoms vendors like ZTE and Huawei continue to face off national security concerns over the use of their equipment from countries such as the US and Australia.
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