15 June 2018
| Alan Burkitt-Gray
Two months after the US issued a denial order on ZTE and more than a week after it agreed a settlement, the company’s future is still unclear.
The company is raising $10.7 billion to fund its return to
business – but its share price is falling and the US Congress is opposing President Donald
Trump’s backing for a settlement.
At the same time an imminent trade war between the US and China
– with tariffs being imposed by both sides –
is likely to cloud the situation further.
Shares in ZTE resumed trading this week after it appeared the company had agreed a settlement with the
US – by paying a $1 billion fine, with $400
million in escrow.
ZTE supplies telecoms equipment to fixed and mobile operators
across the world, though not in the US. It uses hardware and
software from US sources under licence – licences it
broke by selling to Iran despite a US embargo.
Last week’s agreement calls for embedded US
observers to monitor ZTE for 10 years, and for a complete
change of senior management.
Now the company says it has nominated five new directors, Li
Zixue, Li Buqing, Gu Junying, Zhu Weimin and Fang Rong, plus
three non-executive directors, Cai Manli, Yuming Bao and Gordon
Ng. They will replace a 14-person board, which will be removed
under the terms of the US deal.
At the same time ZTE will apply for a $4.7 billion credit line
from Bank of China and $6 billion from China Development Bank.
However the company’s shares have fallen 30% on
the Hong Kong and Shenzhen stock exchanges, a loss of $5.8
billion in only three days by the time trading closed on
Members of the US Congress – from both sides
– are taking a strong anti-ZTE line and are opposing
Bank of China,
China Development Bank