China’s ZTE has received a substantial funding boost from the China Development Bank (CDB) in a deal the equipment maker claims will drive overseas investment and business development.
The agreement increases ZTE’s financing facility with the CDB to $20 billion from the $15 billion arranged in 2009 – itself an extension of the original facility of $8 billion set up in 2005.
“We sincerely thank the CDB for their commitment to ZTE’s development of overseas operations,” said Hou Weigui, ZTE’s chairman. “ZTE will leverage the CDB’s financial support and grasp the opportunities in the markets for 4G, fixed broadband, enterprise networks and terminals, consolidate our advantages and migrate to the higher-value solutions, as we aim to achieve a global top-three position before 2015.”
ZTE (Shenzhen, China) said it is confident of entering a new phase of growth with the support of the CDB, despite the weakness in global telecoms markets caused by an uncertain economic recovery in the US and debt crisis in Europe.
The agreement will give ZTE a much-needed financial boost but comes with a risk, according to Matt Walker, a principal analyst at Ovum.
“Accepting this support will make it harder for ZTE to further penetrate western European and North American markets, where policymakers are concerned about unfair competition from Chinese suppliers,” he said. “This news will not go unnoticed by ZTE’s opponents, both those in the marketplace and the political sphere.”
ZTE was branded a possible security threat to the US by a congressional panel following an investigation into the company and rival Huawei (Shenzhen, China).
The House Intelligence Committee said the two companies should be barred from any US mergers and acquisitions.
For many years ZTE has grown at the expense of western rivals like Alcatel-Lucent (Paris, France), Ericsson (Stockholm, Sweden) and Nokia Siemens Networks (Helsinki, Finland), but it is suffering along with them in the current economic malaise.
For the three months ending in September, the company reported a net loss of RMB1.9 billion ($305 million), compared with a profit of RMB299 million during the same period in 2011, while revenues fell by 13.1% to RMB18.1 billion.