ZTE says US has not been in touch about new bribery charges

Chinese equipment vendor says it has not had a formal approach by US authorities following news reports that it bribed foreign officials to gain advantages.

Iain Morris, International Editor

March 16, 2020

3 Min Read
ZTE says US has not been in touch about new bribery charges

ZTE insisted it had not received notices from US government departments about a new investigation into bribery allegations following news reports last week.

The Chinese vendor's statement came after NBC News last week said the US Department of Justice was looking into allegations that ZTE bribed foreign officials to gain advantages.

"The company would like to clarify that it has not received notices from the relevant government departments of the United States in this regard," said ZTE Chairman Li Zixue in the statement. "The company will proactively communicate with the relevant government departments of the United States, and will make announcements as and when required."

The latest NBC report, which cites sources close to the matter, comes about three years after ZTE was fined nearly $1 billion by US authorities for infringing trade sanctions against Iran and North Korea.

In 2018, the company was banned from acquiring US components when the Justice Department said it had lied about making improvements to its business in the aftermath of its original violations.

The ban forced ZTE to cease operations for several weeks and was only lifted when the firm agreed to pay another $1 billion fine, make staff changes and agree to be supervised by US monitors.

That decision infuriated US critics who continue to regard ZTE as a trade cheat and say its links to the Chinese state make it a security threat, arguing that its network products may be a conduit for Chinese government spies.

Last year, the US imposed new trade restrictions on ZTE when its name was added to the so-called Entity List of organizations that are prohibited from buying US equipment.

Various US suppliers affected by the move appear to have found loopholes that have allowed them to continue selling goods to Chinese companies, while ZTE has also taken steps to diversify its supply chain by finding alternatives to US firms, according to sources at the Chinese vendor.

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Despite its challenges, ZTE has quickly recovered from the original US assault, reporting a net profit of more than $100 million for the first nine months of 2019 after it sunk to a $330 million loss in the year-earlier period.

Last year, the company also grew its share of the overall market for telecom equipment by roughly two percentage points, giving it about one tenth of total revenues, according to research carried out by analyst firm Dell'Oro.

Even so, ZTE's revenues for the first nine months of 2019 were 6% less than it made for the equivalent period of 2015, and its net profit has more than halved over this period.

It has also been cutting jobs to protect margins, with headcount down from 84,622 in 215 to just 68,240 in 2018, according to financial statements.

"The company is fully committed to meeting its legal and compliance obligations," said ZTE in its statement about the reports of a new US investigation. "The top priority of the company's leadership team is making the company a trusted and reliable business partner in the global marketplace. Currently, the production and operating activities of the company are carried on as normal."

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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