ZTE Grows Sales as Western Rivals Struggle

China's ZTE has reported healthy growth in sales and profits over the first nine months of the year despite worsening conditions and a trade dispute with the US.

The company, which sells network equipment and handsets, reported a 4.4% year-on-year increase in revenues, to 71.6 billion Chinese yuan ($10.6 billion), and 9.8% growth in net profit, to RMB2.9 billion ($430 million).

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763)'s recent growth has not been as impressive as that of Huawei Technologies Co. Ltd. , its bigger Chinese rival. But its growth contrasts with the declines at Sweden's Ericsson AB (Nasdaq: ERIC) and Finland's Nokia Corp. (NYSE: NOK), which have blamed a weak spending environment for their current difficulties. (See Nokia Forecasts Sales Decline in 2017, Shares Fall, Ericsson Swings to First Net Loss in 4 Years and Is There No Stopping Huawei?)

Unlike Ericsson and Nokia, both ZTE and Huawei maintain large handset businesses, which makes direct comparisons awkward, but their carrier network divisions appear to have held up despite the spending slowdown.

ZTE did not break out results for the first nine months of the year but did flag growth in all three units -- carrier, enterprise and handsets -- when recently reporting earnings for the first half.

Market watchers believe low-cost and increasingly innovative competition from ZTE and Huawei is adding to the pressure on Western vendors. While both Chinese players remain locked out of opportunities in the US market -- where policymakers have expressed concern about their close ties to the Chinese government -- they continue to make progress elsewhere and count many of Europe's biggest service providers as major customers.

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Not all is rosy, however. ZTE could still get hit by US export restrictions for allegedly violating government sanctions imposed on Iran. That could stop it from using components developed by several US companies that currently form part of its supply chain.

And like Ericsson and Nokia, it has called attention to the spending squeeze in the equipment market. "As a whole, the telecommunications market is under pressure," it said in a company statement.

ZTE said that most of its revenue growth has come from the sale of 4G system and optical transmission products at home and abroad, as well as the take-up of handsets.

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

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