ZTE forecast net profit of RMB 500 – 750 mn

ZTE has forecasted that the company will post net profit of between RMB 500 – 750 million in the first nine months of 2013, rebounding from a loss in the same period a year earlier.

The turnaround in ZTE’s financial performance was achieved on the back of improved gross profit margins and stringent cost controls. In ZTE’s first-half results announcement released today, the company has reported net profit of RMB 310 million, a year-on-year increase of 26.6 percent whereas revenue decreased 11.9 percent to RMB 37.58 bn. Revenue fell because of a drop in sales of GSM and UMTS products in China, and declining demand for 2G devices.

The company also benefited from greater cost efficiency, with a significant year-on-year drop in selling, administrative and research costs, in additional to the disposal gain from the sale of a subsidiary.

For the first six months, ZTE reported operating revenue of RMB 18.8 bn from the domestic market, accounting for 50 percent of overall operating revenue. The company leveraged opportunities presented by the construction of 4G networks and infrastructure related to the Broadband China strategy. The company is also working closely with operators to deliver superior solutions that fulfill their needs.

ZTE reported operating revenue of RMB 18.8 bn from the international market, accounting for 50 percent of overall operating revenue. The company continued to focus on business operations in major markets and deepen relationships with mainstream global carriers, strengthening the development of strategic new products and solutions and frontiers for enhanced business competitiveness.

In terms of revenue break-up, ZTE reported operating revenue of RMB 19 bn from carriers’ networks, RMB 12.5 bn for terminals, and RMB 6 bn from telecom software systems, services and other products.

ZTE has committed its best resources on 4G product research and development to enhance the company’s competitiveness in wireless products, laying the foundation for ZTE to succeed in the next cycle of investment in wireless equipment. In the 2G and 3G market, the company benefited from efforts to optimize its product mix and achieved improvement in gross profit margin.

ZTE also focused on innovation in products for value-added telecommunications services, while continuing to expand business with mainstream global carriers with the aid of broadband multimedia products.

Revenue from ZTE’s smart terminals continued to post growth, as the company deepened its strategic collaboration with mainstream global carriers, and strengthened efforts on brand building and product innovation, taking advantage of burgeoning consumer demand resulting from growth of 4G networks and the mobile internet.

Looking ahead to 2013, the large-scale deployment of 4G networks, particularly the large-scale construction of TD-LTE networks in China, will usher in a new cycle of investment by the telecom industry in the wireless network sector.

In connection with wireline networks, growing consumer demand for data services will support the construction of broadband networks around the world, while various national governments commit to build new network infrastructure and companies invest relevant in technology upgrades.

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