An increase of 37.5% R&D expense on a year-on-year basis

25 October 2018, Shenzhen, China - ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the Mobile Internet, today reported net profit of RMB 564 million for the third quarter. The company strengthened its cost control, and reduced its sales and management expenses on a year-on-year basis.

In the third quarter, ZTE posted operating revenue of RMB 19.3 billion, and its R&D investment reached RMB 3.47 billion, covering 17.9% of the quarter’s revenue, a year-on-year increase of 6.7%, compared with 11.2% of the same period last year.  
 
According to ZTE’s results announcement today, operating revenue of the first nine months ended 30 September 2018 reached  RMB 58.8 billion, and net profit attributable to holders of ordinary shares of the listed company amounted to RMB -7.26 billion.

Meanwhile, the company published its Preliminary Announcement of 2018 Annual Results, estimating that net profit attributable to holders of ordinary shares of the listed company for the year of 2018 amounted from RMB -7.2 billion to RMB -6.2 billion.

During the first three quarters, ZTE adhered to the innovation-driven strategy, focused on valued customers and core products, proactively explored emerging technologies, and maintained great R&D investments in critical fields such as 5G wireless, core network, bearer, access and chipset. ZTE’s R&D expense reached RMB 8.5 billion, making up 14.5% of 9-month revenue, a year-on-year increase of 2.5%, compared with 12.0% of the same period last year. 
 
ZTE’s major business are rapidly recovering with the negotiation and signing of new orders and the further implementation of existing orders. Meanwhile, the company has resumed normal operations in R&D, production and logistics. Specifically, its production and purchasing capabilities have been back on track, and its R&D progress has kept pace with the target preset at the beginning of the year. Also, ZTE has fully restored its customer services.  
 
In addition, ZTE has deepened the negotiations with major global operators to constantly obtain new orders.
 
Taking the opportunity of 5G initiatives, ZTE had a smooth progress in a variety of 5G tests.   For instance, ZTE participated into the phase 3 China’s technology R&D test with its end-to-end products. It takes the lead to complete several 3.5GHz base station tests in SA modes. The company is also the industry’s first to complete all NSA low-frequency tests and all functional tests of core network, fully demonstrating great capability and maturity of ZTE’s 5G end-to-end system.  
 
Meanwhile, ZTE has further deepened its 5G cooperation with operators so that its 5G products and solutions can well match the global commercialization schedule. ZTE  has provided China Telecom with its end-to-end solutions in Xiong’an New District, completing China’s first joint test on 5G-based driverless vehicles, first 5G water surface coverage test and panoramic live broadcast.  
 
With 5G construction drawing near, ZTE will strengthen its core technology innovation, and continuously invest in new 5G technology research and product development. ZTE announced that it has disclosed the first 3GPP 5G standard-essential patents (SEP), exceeding 1000 families to ETSI. It is ZTE’s first 5G SEP disclosure after the completion of the first phase standard of 5G (Release 15). ZTE’s 5G device solution includes 5G smart phones, 5G tablet, and 5G indoor & outdoor routers.
 
Oriented to the future, ZTE will continuously implement its strategic concentration and improve efficiency while enhancing investment in main businesses, core markets and the R&D in key technologies such as 5G and chipset as well. ZTE will keep improving the competitiveness of its flagship products, and reinforcing compliance, internal control and talent pool. Meanwhile, ZTE will strengthen its partnerships with industry’s third parties to promote the positive development of the industry chain.