ZTE ‘shuts down major operating activities’ after US action

09 May 2018 | Alan Burkitt-Gray


ZTE says it has shut down operations because of the action taken against it last month by the US.

Customers that are likely to be immediately affected by the ruling include all three large Canadian operators, Bell Canada, Rogers and Telus, as well as Orange, Telefónica, SoftBank, True, Telekom Austria and Forthnet.

ZTE is a significant contributor to the development of 5G standards and if it does disappear that may disrupt the rollout of the new mobile standard over the next few years while other companies argue over the intellectual property involved.

ZTE’s plight follows a statement by the US Department of Commerce (DoC) in April that the vendor had not taken the action it promised to take against those executives implicated in smuggling equipment to Iran. ZTE agreed in 2017, in a settlement of an action by the DoC in 2016, to reprimand them and deprive them of their bonuses.

In punishment the DoC issued a denial order that outlaws US companies such as Cisco, Dell, Intel, Microsoft, Oracle, Qualcomm and Symantec to trade with ZTE for seven years. The decision will also affect ZTE’s growing handset business: its terminals use Qualcomm chips.

This morning ZTE issued a statement to the Hong Kong stock exchange, where its shares are quoted: “As a result of the denial order, the major operating activities of the company have ceased.”

It said it was still trying to negotiate a settlement with the US. “The company and related parties are actively communicating with the relevant US government departments in order to facilitate the modification or reversal of the denial order by the US government and forge a positive outcome in the development of the matters.”

ZTE did not elaborate on the decision, which will have an impact on operators around the world that use its equipment – including smaller cable and telecoms companies in the US, where the previous ban applied only to the larger carriers.

Yesterday ZTE said it had delayed its annual shareholders meeting. It was due to happen this Friday but ZTE said it now expects to hold the meeting before 30 June.

In April ZTE protested that it had established a compliance committee in response to the US action – though it said that committee is “led directly by its CEO”, and has built a global team of experienced export control compliance experts, hired professional guidance, and organised compliance training covering over 65,000 employees.

ZTE also said in April that “the company’s board of directors and management team will do their utmost to protect the interest of 80,000 employees to work legally, as well as the interest of their families”.