ZTE Gains Ground on Ericsson, Nokia in H1

Chinese equipment vendor reports growth in sales and profits while its big Western rivals struggle.

Iain Morris, International Editor

August 25, 2016

3 Min Read
ZTE Gains Ground on Ericsson, Nokia in H1

Chinese equipment vendor ZTE has made further gains on larger Western rivals Ericsson and Nokia, reporting growth in sales and profits in the first half of the year thanks largely to the expansion of 4G networks in China.

Operating revenues rose by 4.1% in the first six months, to 47.8 billion Chinese yuan ($7.2 billion), compared with the year-earlier period, while net profit was up 9.3%, to around RMB1.8 billion ($270 million).

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) is dwarfed by domestic rival Huawei Technologies Co. Ltd. , which last year overtook Sweden's Ericsson AB (Nasdaq: ERIC) to become the world's largest supplier to communications service providers (CSPs), but it has also managed to report growth while its bigger Western competitors have been struggling. (See Huawei: New King of the CSP Market.)

ZTE's rate of revenue growth pales in comparison with the 40% year-on-year increase that Huawei has already reported for the first six months, but it matches up favorably with a 7% revenue decline at Ericsson and one of 10% at Nokia Corp. (NYSE: NOK), in local currency units. (See Huawei Reports 40% H1 Sales Growth But Margins Suffer and Ericsson 'Doubles' Savings Goal as Sales Slump.)

Unlike Ericsson and Nokia, which are heavily focused on the sale of networks and services to CSPs, the Chinese companies maintain large and growing devices businesses, making direct comparisons with their European counterparts awkward.

Even so, their CSP divisions have been driving much of their growth.

ZTE reported a 5.1% year-on-year increase in sales at its "carriers' networks" division, to RMB28.7 billion ($4.3 billion). Revenues from the comparatively small "government and corporate business" rose 2.5%, to RMB4.6 billion ($690 million), while those from the devices business were up 2.6%, to RMB14.4 billion ($2.2 billion).

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel
here on Light Reading.

Last year, Huawei trumpeted a 21% increase in sales to communications services providers, to about $36 billion.

Besides the ongoing rollout of 4G networks in China, ZTE attributed its growth to the rising take-up of cloud-computing and big data services, as well as interest in video and Internet of Things services.

Nevertheless, the company drew attention to "increasing pressure in operations" during the first half of 2016 due to a decline in traditional activities.

Hoping to better position itself for growth in future, ZTE today announced a new five-year strategy called M-ICT 2.0 based around the five key trends of "virtuality, openness, intelligence, cloudification and the Internet of Everything" -- handily contrived to produce the acronym VOICE.

For more on that strategy, see this report from the team at Telecoms.com.

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

Read more about:


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).

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like