ZTE board members have approved the issuance of 686,836,019 A Shares in an effort to raise capital for 5G research and development.

Jamie Davies

January 31, 2018

2 Min Read
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ZTE board members have approved the issuance of 686,836,019 A Shares in an effort to raise capital for 5G research and development.

While ZTE could sometimes be seen as a poor man’s Huawei, in truth it is just as threatening to the more traditional network infrastructure vendors. Over the last couple of years, Huawei might have been grabbing the headlines and second helpings of global market share, ZTE has also been eating into the profit margins at former world-beaters Ericsson and Nokia.

It might still be sitting in fourth place, but looking at the most recent financial figures it is certainly heading in the right direction. For the nine months ending September,  ZTE boasted of operating revenues of roughly $12.2 billion, a 7% increase for the same period in 2016. When you compare this to Ericsson or Nokia’s quarterly results for the same period,  6% and 7% decline respectively, the story starts to make a bit more sense.

There still is a considerable buffer for ZTE to catch Nokia and Ericsson, but it is consistently heading in the right direction. Huawei has also shown how quickly the status quo can be changed as well.

Puffing out its chest, ZTE is now showing it means business when it comes to 5G. Adding to the billions it has spent or planning to spend on 5G R&D already, the team will also be selling off 686,836,019 shares on the Shenzhen and Hong Kong stock exchanges to raise $2.1 billion. The majority of this will be directed towards ‘research and product development relating to 5G network evolution’, while roughly 30% will be replenish working capital.

“With the global leading position in 5G network sector, the Company expects that 2018 to 2020 will be a crucial period for the formulation and industrialization of the global standard for 5G technology,” the filing states.

“The Company considers that the Proposed Non-public Issuance of A Shares will enable the Company to maintain its high level of investment in research and development, help ensure its technological competitive edge and develop its main products and businesses with core advantages, which may help the Company increase its market shares in the mainstream products and markets as well as enhance customer satisfaction, thereby help increasing the profitability of the Company.”

An extra couple of billion is certainly something to boast about a couple of weeks ahead of Mobile World Congress. This year’s event promises to be a bombardment of euphoric 5G promises as vendors scrap for the attention of wide-eyed operators. ZTE seemingly profited quite handily out of the 4G evolution, and it would seem it is positioning itself well ahead of the 5G slug-feast.

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