ZTE Hires US Official to Deal With US Govt

ZTE has recruited a former US regulatory official to take charge of its dealings with the US government in a possible sign it is renewing efforts to break into a market that has for several years remained largely off-limits.

Formerly a deputy assistant secretary for the US Department of Commerce (DoC), Angela Simpson was today named as the vice president of US government affairs for the Chinese vendor, which sells network equipment and services outside the US.

Along with domestic rival Huawei, ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has been locked out of the most lucrative opportunities in the US since 2012, when US authorities published a report that damned both companies as a potential security risk and advised the nation's biggest telcos not to use their products.

Relations with the US further soured last year after ZTE was accused of selling equipment to Iran that included components made in the US, in breach of sanctions. US authorities imposed a temporary export ban on ZTE and earlier this year slapped it with a $900 million fine that wiped out company profits for 2016. (See ZTE to Pay $892M Fine to Settle US Trade Dispute.)

In recent months, ZTE has been at pains to overhaul its management, systems and processes and demonstrate that it has made improvements to corporate governance across the board.

The vendor evidently hopes that Simpson could help to break down some of the barriers that prevent it from selling its technologies to the biggest service providers in the US.

"Angela Simpson's policy experience and knowledge of the technology industry make her an excellent choice to lead US government affairs for ZTE USA," said Lixin Cheng, the chairman of ZTE's US subsidiary, in a statement. "We are excited to have her join us as we continue to invest in local partnerships that will help us deliver innovative products and expand our presence in the US."

But Simpson would have her work cut out in trying to secure a bigger role for ZTE in the US market. There has been little sign that authorities are about to relax their stance on Huawei Technologies Co. Ltd. and ZTE, and such a move would seem at odds with the protectionist rhetoric of current US President Donald Trump.

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While authorities support the restrictions, many industry executives are likely to welcome any opening up of the market that would lead to lower prices for network equipment and services.

Both Huawei and ZTE have made considerable inroads with telcos in other parts of the world and already work with T-Mobile US Inc. owner Deutsche Telekom AG (NYSE: DT) as well as Japan's SoftBank, which controls T-Mobile rival Sprint Corp. (NYSE: S).

By contrast, the lifting of what is effectively a ban would put further pressure on rival equipment vendors Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK), which have had parts of the US market to themselves in the absence of Huawei and ZTE.

Elsewhere, competition from the Chinese players has squeezed profit margins and been partly responsible for earnings setbacks for both Ericsson and Nokia in recent quarters.

ZTE said that Simpson was previously the deputy assistant secretary for the DoC's National Telecommunications and Information Administration and also held roles at the agency as acting chief of staff and senior advisor to the office of the assistant secretary. Before that, she was director of government affairs for Covad Communications, a former US provider of broadband services.

The news of her appointment came shortly after ZTE reported a 30% increase in net profit for the first six months of the year driven by growth at its carrier networks and consumer devices divisions. (See ZTE Bucks Downturn but Enterprise Biz Disappoints.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

danielcawrey 8/30/2017 | 10:03:11 AM
US Govt ZTE needs to make the US government happy. 

That's not going to be easy. There are clear issues with hardware today that are really scaring US companies. Security is a big deal. 
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