China's ZTE Q1 Net Profit Up 40%, Beats Forecast

Q1 Net Profit 109.9 Million Yuan vs 105.5 Million Yuan Forecast

■   Terminal sales, including 3G handsets, up 42% year on year

■   Sees rising opportunities in overseas markets

ZTE, China’s No.2 telecom equipment maker, posted a 40% jump in first-quarter profit, beating expectations, on growing exports and a continued 3G handset binge at home.

ZTE said the effects of the financial crisis were waning and it was seeing more opportunities in international markets.

It attributed its robust results to strong growth in the terminals segment, which includes 3G handsets, with sales rising 41.8%. Its carrier network segment remained flat.

Analysts said reduced spending by China’s three wireless carriers on 3G networking equipment this year should be offset by growth in third-generation handset sales as more people sign on to the higher-end service.

ZTE told Reuters earlier in the month that it also expected overseas sales growth to pick up this year after a sluggish 2009, amid an export drive as 3G sales remain flat in its home market.

ZTE reported its first-quarter net profit rose 39.7% to 109.9 million yuan ($16.1 million) compared with 78.7 million yuan a year earlier. The result beat analysts’ expectation of 105.5 million yuan, according to the average of two analysts polled by Reuters.

Revenue for the quarter ended March came in at 13.3 billion yuan compared with 11.7 billion yuan a year ago.

Shenzhen-based ZTE’s 2009 revenue jumped 36% to 60.3 billion yuan, fuelled by China’s spending binge on 3G infrastructure.

Last December, China’s telecom regulator said domestic investment in 3G systems reached $21 billion in 2009. ZTE Chairman Hou Weigui, whose company won about 36% of China’s 3G contracts, told Reuters earlier this month he expected 3G spending in China to stay roughly the same this year.

ZTE’s shares tumbled 12% in early March after the nation’s three major wireless carriers announced 2010 spending plans that were lower than expected.

Its shares have recouped some of those losses since then, and are down about 2.8% this year, in line with a 2.8% fall in the broader Hong Kong market.