ZTE Announces 2010 Interim Results

SHENZHEN, China--(BUSINESS WIRE)--ZTE Corporation (“ZTE” or the “Group”) (H share stock code: 0763.HK / A share stock code: 000063.SZ) today announced that the Group operating revenue increased by 10.89% year-on-year to USD4.524 billion. Revenue contribution from the European and US markets amounted to 18% of total revenue for the first time. The year-on-year revenue contribution from these two markets increased by 45%.

The net profit grew by 12.02% to USD129.143 million in the six months ended June 30, 2010 based on Hong Kong financial reporting standards. Basic earnings per share amounted to USD0.047.

ZTE’s international revenue rose 19.58% year-on-year to USD2.246 billion, accounting for 49.65% of its total operating revenue.

In the first half of 2010, ZTE supported 3G network construction projects of some carriers and assisted with the replacement, coverage extension and improvements of relevant networks. This helped to consolidate the company’s market share in China’s 3G network construction amid a slowdown of investment in 3G networks.

The Group leveraged its customization capability and cost advantage to participate in carrier tenders for products such as transmission networks, wireline access and terminals. Encouraging tender results were achieved, ensuring stable growth in the Group’s domestic business revenue.

While revenue from Asia declined due to an incident relating to the safety inspection of communications equipment in India, the Group still reported year-on-year growth in international revenue. The Group worked closely with global carriers such as France Telecom, Telkom SA, Telefonica of Spain and America Movil.

By product, the Group registered year-on-year revenue growth of 1.08% for carrier networks, 39.71% for terminal products and 17.99% for telecommunication software systems, services and other products.

In wireless products, the Group optimized its position in the high-end markets of Europe and the United States by consistently meeting customer needs in terms of cost reduction, low carbon emission and environmental issues. The Group also enhanced its standing due to its experience dealing with multi-national carriers and advanced Software Defined Radio (SDR) product solutions.

Meanwhile, the company remains committed to key customers in the Asia-Pacific region, Africa and Latin America, which all provide an increasing share of revenue in wireless products.

ZTE’s GSM/UMTS/LTE products were deployed by the leading local European carriers, including KPN, Telenor and Optimus. ZTE and Telefonica deployed the first WiMAX network in Spain. The company has also deployed seven LTE commercial networks and nearly 50 trial networks globally. Building on its success in the China 3G market, ZTE’s wireless delivery capability received recognition from leading carriers in Europe and the US.

In wireline products, the Group maintained its advantageous position in access network and transmission network products. With regards to access networks, the wireline access products, represented by xPON, continued to lead the market. The large-scale, network-wide commercial application of the FTTx solutions was achieved in major cities.

In relation to transmission products, ZTE’s PTN, wave division and data communications products made headway in the industry and has been well received by leading global carriers. In the first quarter of 2010, ZTE’s revenue from optic network products ranked third in the world. Its high-end cluster router T8000 was also launched globally.

During the first half of 2010, the Group achieved rapid growth in the sale of its terminal products, reporting 39.71% year-on-year growth in revenue. Driven by the buildup of 3G users in China, domestic sales of the Group’s terminal products (comprising 3G handsets in various modes) increased significantly, laying a solid foundation for sales revenue growth of terminal products. Internationally, the Group’s terminal products, particularly the 3G handsets and data card products, have made an impact in high-end markets.

ZTE’s data card products and Android smartphones are top sellers in Europe. ZTE’s customized handsets were adopted by Softbank, the third-largest carrier in Japan. These factors helped drive the continual increase in sales volume and revenue of the company’s terminal products.

Looking to the second half of the year, carriers will focus on the development of mobile broadband, which will require ongoing broadband construction.

Carriers will continue with their testing and deployment of high-end technologies, including 4G technology. Cloud Computing is also expected to be more adopted by carriers.

The gradual implementation of the convergence of three networks in the domestic market will underpin the development of a variety of technologies and services which will provide additional development opportunities for the Group.

The Group will continue to enhance its partnerships with domestic carriers and move to consolidate and boost its current market position by participating in major network construction projects in the second half of the year.

Given intense competition in the international market, the Group will capitalize on opportunities presented by the general trend of network upgrades or broadband conversion by responding to customers’ needs, enhancing strategic cooperation and bolstering its inherent strengths.