Friday, March 5, 2021
 
Columnist
Martin Hennecke
 
ZTE
HKEx Stock Code : 00763 
 
Corporate Profile
Principally engaged in the design, development, production, distribution and installation of a broad range of advanced telecommunications equipment, including carriers' networks, terminals, telecommunications software systems and services and other products.

Business Review - For the year ended December 31, 2012

As competition in the global telecommunications industry conducted itself in a more rational manner in 2012, the Group focused on populous nations and mainstream carriers in its business development and operation, with vigorous plans to tap the government and enterprise and services sectors. However, owing to the combined effects of, among others, postponed execution of certain systems contracts and decrease in revenue from terminals in the domestic market, and delayed progress of certain international projects, we experienced a decline in overall operating revenue as compared to 2011. Meanwhile, the Group's net profit attributable to shareholders of the listed company decreased by a relatively significant margin, reflecting a decline in overall gross profit margin as compared to 2011, as the results of a larger number of low-margin contracts in Africa, South America, Asia and the domestic market recognized for 2012. The Group's operating revenue for 2012 amounted to RMB84.22 billion, representing a year-on-year decline of 2.4%, while net profit attributable to shareholders of the listed company decreased 237.9% to RMB-2.84 billion. Basic earnings per share amounted to RMB-0.83.

1) By market

The domestic market

For the year under review, the Group reported operating revenue of RMB39.56 billion from the domestic market, accounting for 47.0% of the Group's overall operating revenue. The Group worked in close tandem with the technological choices and network construction plans of carriers to capitalise on opportunities in the domestic market presented by large-scale 3G construction, the start of the construction of 4G commercial experimental networks and the Broadband China strategy, while consolidating its market shares through enhancements of its product competitiveness and the introduction of new technologies and new products, etc.

The international market

For the year under review, the Group reported operating revenue of RMB44.66 billion from the international market, accounting for 53.0% of the Group's overall operating revenue. The Group continued to focus on in-depth business development and operation in major populous nations and with mainstream global carriers to enhance the capabilities for long-term sustainable development. Meanwhile, the Group was also vigorously establishing its presence in the market for government and enterprise networks, leveraging opportunities presented by in-depth development in informatisation by the government and enterprise customers.

2) By product

For the year under review, the Group reported operating revenue of RMB41.60 billion for carriers' networks. Operating revenue for terminals amounted to RMB25.84 billion. Operating revenue for telecommunication software systems, services and other products amounted to RMB16.78 billion.

Carriers' networks

In connection with wireless products, the Group reinforced strategic cooperation with its existing customers on traditional 2G/3G products such as GSM/UMTS/CDMA, etc, while vigorously exploring new market niches. In respect of commercial construction relating to 4G products, we continued to enhance partnerships with mainstream global carriers on all fronts through FDD-LTE products, while maintaining our global leadership in TD-LTE products, for which commercial contracts were secured in India, the Middle East and Japan, etc. Against intense competition in the global marketplace, the Group strengthened its in-depth operation of wireless products and achieved sustainable development for wireless products, while assuring compliance with network performance benchmarks and delivery schedules.

In connection with wireline and optical communications products, although there was a decline in revenue from wireline switch and access products, the Group reported stable growth in optical communications products by continuing to invest in the research and development of new technologies and actively matching its solutions with carriers' network construction, amid a rapidly developing broadband market and the construction of supporting facilities for the Mobile Internet.

In terms of the service products, the Group also reported positive development by enhancing innovation of new products based on users' experience and requirements.

Terminals

While operating revenue from terminal products decreased in line with weaker market demand for feature phones and data cards, the Group continued to sustain rapid growth in the operating revenue of smart terminals for the year under review, as market demand for smart terminals continued to increase in line with the development of the Mobile Internet and the growing variety of mobile applications, with smart terminals accounting for an increasing percentage of the Group's revenue of terminals giving rise to a more reasonable product mix, a more balanced market distribution and more diversified sales channels.

Telecommunications software systems, services and other products

For the year under review, operating revenue from the Group's telecommunications software systems, services and other products reported year-on-year growth of 31.1%, with relatively rapid revenue growth in the video and network terminal products and other products.

Business Outlook - For the year ended December 31, 2012

In 2013, in connection with wireless networks, the rapid development of the Mobile Internet will drive the optimisation and upgrade of 3G networks and the commercial deployment of 4G networks. In connection with wireline networks, broadband markets around the world in varied stages of development are enjoying thriving development to fulfil the services requirements of users. Policies relating to the broadband strategy adopted by various countries will continue to drive broadband construction, while increased data flow over wireless and wireline networks will present development opportunities for transmission networks. Meanwhile, smart terminals will remain in the fast track for development given the continuous penetration of the Mobile Internet and the growing variety of mobile applications. Moreover, the ability to provide integrated solutions and forge stable, long-term partnerships will be crucial given changing requirements of major carriers. In this regard, the Group has started cooperation with mainstream international carriers on all fronts on the back of its globally competitive product solutions.

In 2013, the Group will make dedicated efforts in product innovation and solution operations with an emphasis on mainstream products, while endeavouring to enhance its R&D efficiency, implement in greater depth the strategy on populous nations and mainstream carriers, focus on markets in which it claims dominance, and vigorously develop business in the government enterprise and services sectors. In 2013, the Group will adopt the operations settlement system to facilitate resource management and control, so as to refine cost management and enhance operating efficiency.

Source: ZTE Corp (00763) Annual Results Announcement
Chairman Hou Weigui Issued Capital (shares) 630M
Par Value RMB 1 Market Capitalisation (HKD) 9,003M
 
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