ZTE’s $2.7 Billion Loss Shows Tougher Challenges After US Fine

ZTE Corp. unveiled a settlement with the U.S. government to rescue the Chinese telecom-equipment maker. But investors put a steep initial estimate on the cost of the deal: at least $2.7 billion.

ZTE agreed to pay at least $1 billion in penalties and overhaul its leadership to escape essentially a death sentence. That still leaves it with the challenge of replacing its entire senior management and board just as it tries to rebuild trust with phone companies and corporate customers. Its shares plunged 42 percent in Hong Kong and the 10 percent daily limit in Shenzhen, wiping out $2.7 billion of market value as trading resumed after a two-month hiatus. If the fall in Shenzhen eventually matches Hong Kong’s Wednesday slide, the value lost could reach $7.7 billion, though mainland investors typically follow their own logic.

The Shenzhen-based company didn’t explain how it would recruit new managers or who would lead the business following the departures of executives like Chairman Yin Yimin and President Zhao Xianming. Typically, those decisions would be handled by the board — but that group is also in flux. That leadership tumult comes as telecom operators around the world prepare to pick suppliers and spend billions on blazing-fast fifth-generation wireless technology.


Leave a Reply