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Networks & Infrastructure
ZTE given $15 billion credit line facility
European president denies the deal buys market share
by Kendrick Struthers-Watson
While no one will debate that the world's economy is having a continued affect on the telecom vendor community's ability to reserve new investment funds, China-based ZTE Corp. seems to be bucking that trend.
At the end of March, ZTE announced it had entered into a strategic partnership with the China Development Bank by signing a "Development of Financial Cooperation Agreement" covering a US$15 billion credit line. Under the agreement, both parties will work to establish an investment and financing platform that includes expansion into foreign markets.
According to the five-year cooperation framework agreement, China Development Bank will provide ZTE with a $15 billion credit line to include ZTE’s overseas project financing and its credit limits. Both companies are currently in discussion to develop specific terms and procedures on the financing project and how to effectively execute the business co-operation.
China Development Bank is the fifth largest commercial bank in China and in 2008, it was valued at RMB 2,890 billion (US$422.8 billion) with a non-performing loan ratio within 1 percent. It is also reported that the bank holds exceptional advantage in the area of export credit.
Of course, this new round of funding is already seeing controversy.
Critics argue that ZTE is in effect "buying" market share by offering credit facilities to potential customers, a fact that Lin Cheng, ZTE President for Western Europe, hotly denied during a meeting last week in London.
“The China Development Bank holds huge amounts of foreign currency which it cannot dispense in China, therefore, we have been asked by the bank to assist them in the task of dispersing these reserves across new and emergent foreign markets," he said. "This facility will enable us to help customers get access to finance that may not be available from their normal finance providers.”
ZTE believes that during these challenging times, strengthening its cooperation with the bank will help it further partner with global telecom carriers. With this new strong financial capability, the company believes it will be able to take advantage of potential new business opportunities through a combined effort of expanding market reach and rolling out new technologies. During 2008, ZTE reported a revenue of approximately RMB 44.293 million (US$6,388 million), representing an increase of 27.37 percent over 2007.
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