ZTE Chairman Apologies for US Fiasco, Vows 'T0' Plan Will Get Firm Back on Track
Yi Yi
DATE:  Jun 30 2018
/ SOURCE:  Yicai
ZTE Chairman Apologies for US Fiasco, Vows 'T0' Plan Will Get Firm Back on Track ZTE Chairman Apologies for US Fiasco, Vows 'T0' Plan Will Get Firm Back on Track

(Yicai Global) June 29 -- The chairman of disaster-stricken telecoms equipment maker ZTE has apologized to investors and pledged to get back on track after the United States banned the firm from buying American technology.

"The incident led to economic losses for shareholders, and I apologize for that," Yin Yimin said at the annual shareholders meeting today. He guarantees the new plan, named T0, will have the company back to normal as soon as possible.

"The company has made a range of contingency plans," he continued. "A T0 work group has laid out a thorough plan for the business's restoration, and the company has great confidence in shutting down the denial order."

The 'denial order' is a seven-year ban issued by the US Department of Commerce, which prevents ZTE from using American tech after it illegal sold American tech to Iran and North Korea two years ago. The firm is China's second-largest telecoms equipment manufacturer, and depends on US imports for around a third of its components.

"The T0 workgroup began a recovery plan a month ago, and the company will push ahead with this despite changes to the board," Yin added. "Over the past two months, we only lost 100 more workers than last year, so I see no momentous changes in our team. The workgroup knew when we signed a settlement agreement with the DOC on June 8 that our board of directors would be affected, so the group aims to focus on the organization as a whole and not just individuals."

Steady Cash Flow

Even though the company had to halt operations two and a half months ago due to the lack of resources, it has been keeping up with supplier payments without help from the banks.

The company put forward a plan to distribute 2017 profits in March, but Yin warned that as this was suggested prior to the US sanction, shareholders should be prudent when voting for the motion as the firm has used up a lot of cash reserves since.

"Given our current cash capacity, a dividend will not cause serious problems," he said. "But we are still under embargo and hope to use all of our cash to recover production. As a shareholder myself, I plan to veto the dividend plan."

"As the denial order has not been lifted, our task is to boost the confidence of the entire company, including empoyees," added Li Buqing, a directorial candidate.

The embargo has affected ZTE's chances of securing new projects and will have an impact on whole-year performance, said Yin. "It will be very difficult to achieve the business objectives planned at the beginning of the year. Although we cannot start operations in the near future, the vast majority of our clients around the world still have confidence in us. There have been no mass cancellations -- they are waiting for us."

The sanctions' impact on device operations is much greater than in previous years, as the products affected are fast=moving consumer goods, he added, saying this will hit performance hard.

5G & The Future

Zhao Xianming, ZTE president, reassured investors that the firm's core research capabilities were still in place, saying development work overall has barely been affected.

"I am still very confident that after the ban is suspended or lifted, our research and development department will be able to resume and finish the work that has been delayed," he said, adding that the company will retain its spot as an industry leader in product performance and the commercialization of 5G, which will provide mobile internet speeds dozens of times faster than current 4G standards.

ZTE is confident it has a solid base to stay ahead of the 5G industry, he continued. Its core technology in the sector has been commercially tested in software and hardware which has been industry-endorsed, so it is fair to say that ZTE is leading the way in key technologies, Zhao said.

He believes that 5G performance will improve once more users adopt the tech. "Leading commercialization means leading in cost," Zhao added. "If ZTE occupies a large enough share of the domestic market, it will have a leading edge in the global market."

Follow Yicai Global on
Keywords:   Shareholder Meeting,Contingency Plan,Capital Flow,ZTE,5G,U.S. Sanction