ZTE to report large-scale increase in profitability in main operations, and improvement in operating cashflow

20 January 2014, Shenzhen, China – ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a publicly-listed global provider of telecommunications equipment, network solutions and mobile devices, today issued a guidance for a return to profitability in the company’s full-year financial results in 2013.

Full-year net profit attributable to shareholders will be between RMB 1.2 billion and RMB 1.5 billion, as ZTE reported a large-scale improvement in profitability in its major operations. The company exercised stringent control in expenses, and adopted tighter scrutiny of business that offer lower margins. ZTE also strengthened management of cash flow and account receivables, resulting in a large increase in operating cash flow. Sales, administrative and research and development expenses were reduced from a year earlier.

ZTE has rigorously implemented changes in strategy, operations and corporate organization in the past two years, making it a priority to improve operational efficiency and returns on investment, alongside business growth. The company introduced major human resources initiatives to empower employees, including a comprehensive review of the salary structure and a stock option incentive program.

In 2013, ZTE strengthened the company’s execution in major product groups and markets, and provided improved services and support to key customers. In China, ZTE capitalized on the company’s “early-mover” advantage in the 4G LTE to consolidate our leading position in the market. ZTE achieved major breakthroughs in the telecommunications markets in South Africa and Spain, and became a top-4 smartphone provider in the United States.

ZTE’s proprietary “Cloud Radio” technology was deployed by operators to offer higher-performance and more consistent 4G coverage for a better user experience for subscribers. The company’s Internet data center solutions were also deployed by Internet service providers including Baidu and Tencent. The GSM-R system offered by ZTE’s Enterprise division is now in use in China’s High-Speed Railway network, and the company released the “iCity” and “U-Safety” solutions for metropolitan public information systems. ZTE’s new nubia smartphone brand rapidly emerged as a recognized brand among consumers.

Recently, ZTE announced the formation of the Mobile Devices business group and the Enterprise business groups, to be led by Executive Vice President Mr. Zeng Xuezhong, and Senior Vice President Mr. Pang Shengqing, respectively. The new organizational changes are designed to make the two business groups more responsive and efficient.

In 2014, ZTE is committed to pursue further reforms in its operations to add new flexibility and vitality to the company. The company will intensify its focus on key businesses and operations, and strive for higher efficiency. In the Operator Solutions division, ZTE will leverage its leadership of the 4G market in China to grow its operations internationally, and target significant breakthroughs in the development of 4G equipment, mobile devices and chipsets. In the Mobile Devices division, ZTE will focus on user experience and branding to establish increased rapport with consumers, marrying a new mindset with the company’s traditional technological advantages. In the Enterprise division, the company is committed to the development of advanced and industry-leading technology solutions, and achieve increased competitiveness.