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ZTE reports 48 percent drop in profits

Competition results in nosedive
Wed Aug 22 2012, 13:50
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CHINESE PHONE MAKER ZTE saw its profits drop by almost 50 percent in the first half of 2012 despite an increase in sales from the same period last year.

ZTE, known for its cut-price Android smartphones and network infrastructure equipment, released its half-yearly financials showing that revenue increased by 15.21 percent to RMB 42.6bn. While ZTE enjoyed healthy growth in revenues its profits fell off a cliff, dropping 48.5 percent to RMB 655m.

According to ZTE, the firm suffered from "slackened global economic growth, continued competition in the telecommunications industry and volatility in exchange rates".

In the company's financial report, it elaborated further, saying, "The [ZTE] Group's net profit declined in comparison the same period last year, reflecting reduced investment income, exchange losses, postponement of network contract tenders of certain domestic carriers and lower gross profit margin."

In the last few years Huawei and ZTE have been winning numerous network infrastructure contacts as mobile operators start migrating to fourth generation Long Term Evolution (LTE) networks. In the past year both firms have come under increasing pressure, with some countries alleging that they have links with the Chinese government and military.

While ZTE's profits downturn is cause for concern, the firm's revenue still showed impressive growth and with more nations auctioning off 4G spectrum, there's still plenty of business to go around. µ


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