ZTE signs $20bn agreement with China Development Bank

Chinese infrastructure vendor ZTE has extended its strategic partnership agreement with China Development Bank (CDB). As a result, CDB will expand its financing facility for ZTE to $20bn.

In 2005, CDB and ZTE began their cooperation, agreeing a facility of $8bn, and then in 2009, the same year rival Huawei signed a $30bn deal with the CDB, the facility was increased to $15bn.

According to Hou Weigui, chairman of ZTE, the firm will use the financial support to “grasp the opportunities in the markets for 4G, fixed broadband, enterprise networks and terminals, consolidate our advantages and migrate to the higher value solutions, as we aim to achieve a global top-3 position before 2015.”

The deal comes at a crucial time for the company, and the industry, according to Matt Walker, principal analyst network infrastructure telecoms at research firm Ovum.

“In 2009, ZTE pursued new financing with clear hopes of growing global share during the financial downturn; it succeeded in this. But three years later, telecom infrastructure markets remain weak, and no vendors are immune from the current pressures,” he said.

This $20bn agreement gives ZTE a much-needed financial boost as it copes with weak sales, declining profits, and layoffs, Walker added. At a time when several key rivals are struggling, and selling assets to raise cash, fresh support from the CDB may give ZTE a buffer to ride out the current turmoil.

“But there is a risk for the company. Accepting this support will make it harder for ZTE to further penetrate western European and North American markets, where policymakers are concerned about unfair competition from Chinese suppliers,” Walker warned. “This news will not go unnoticed by ZTE’s opponents, both those in the marketplace and the political sphere.”