Chinese equipment maker ZTE has reported a 23% increase in net profit for the first half of the year, to RMB302 million ($49.2 million), even though revenues slid by 11.6%, to RMB37.7 billion.
In a statement, the company blamed the revenues slippage on a decline in revenue from GSM and UMTS products in China as well as poor sales of GSM handsets and data cards both at home and abroad.
Improved costs controls helped ZTE (Shenzhen, China), which is second only to Huawei (Shenzhen, China) among Chinese makers of telecoms equipment, to grow its profits compared with the first half of 2012.
ZTE also recognized investment income from the disposal of assets in Shenzhen ZTE Technology, which provides visual monitoring and environmental monitoring systems for telecoms companies, utilities and rail lines.
ZTE has reportedly said it expects the market to improve later in the year as Chinese operators increase their investments in the rollout of 4G networks.
According to a report from Dow Jones Newswires, China Mobile, the country’s largest mobile-phone operator, is to spend about $7 billion on the deployment of 4G networks this year.
Nevertheless, ZTE has been suffering partly because of difficulties in the US market, where it has faced an effective ban on the sale of its products since a congressional report published in October claimed that both Huawei and ZTE posed a security risk.
Report authors said the equipment installed by Huawei and ZTE for US operators could be used by Chinese authorities – which maintain strong links with the companies – for spying.
The company has also been hit by a slowdown in the sale of equipment in recession-struck European markets, with operators scaling back their investments until conditions improve.
The operator is still able to exert pricing pressure on Western rivals like Alcatel-Lucent (Paris, France) and Nokia Siemens Networks (Helsinki, Finland), but is also feeling the effects of the economic downturn.