ZTE warns shareholders to ‘exercise caution’ after US ban

ZTE warns shareholders to ‘exercise caution’ after US ban

ZTE says it is carrying out a “thorough assessment” of the impact of the trade embargo imposed on it by the US on Monday, and adds that it is cooperating with US authorities. Shareholders should “exercise caution”, said the company.

The Chinese equipment and handset vendor is reeling after the US Department of Commerce’s Bureau of Industry and Security listed ZTE and three subsidiaries for apparently breaking export regulations. The company had illegally used US components and software in exports to Iran, said the DoC. 

The need for an export licence means ZTE may be completely unable to use any US components in its equipment and handsets, whatever the destination.

Documents – signed by some of ZTE’s highest executives – that were leaked to the media in advance showed that the vendor had set up a clear strategy to evade regulations.

ZTE chairman Hou Weigu said in a statement to the Hong Kong stock exchange: “The company is conducting a thorough assessment on the potential impacts of the restriction measures on the business and operation of the group.”

He added: “As at the date of this announcement, the company has been and will continue to be cooperative in the investigations by the US relevant governmental department, and has been actively facilitating communications with the US governmental department for to search for a solution.”

But he warned shareholders: “There is uncertainty as to whether a solution can be achieved through the communication between the company and the relevant US governmental department,” adding: “Shareholders and potential investors of the company are advised to exercise caution when dealing in the securities of the company.”

Trading in ZTE shares on both the Hong Kong and Shenzhen stock exchanges has been suspended since Monday.

In an earlier statement the company said: “ZTE is fully committed to compliance with the laws and regulations in the jurisdictions in which it operates. ZTE has been cooperating, will continue to cooperate and communicate with all US agencies as required. The company is working expeditiously towards resolution of this issue.”

The DoC said on Monday that ZTE and three subsidiary companies – including one based in Iran – were subject to the US Export Administration Regulations (EAR) and that there is a “presumption of denial” of any request for an export licence from the US authorities.

A number of US companies supply ZTE with components and software – but they are not allowed to do so if the final destination is one of a number of banned countries, including Iran.

Intel confirmed that ZTE is a customer but would make no further comment. Qualcomm said that it can no comment. Other companies, including ZTE and Iran’s main telecoms company TIC, have not yet responded to a request for comment.

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