ZTE to raise $1.66bn to boost 5G network development

ZTE to raise $1.66bn to boost 5G network development

16 January 2020 | Alan Burkitt-Gray

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Chinese equipment maker ZTE is to raise $1.66 billion in a private share placement in order to fund 5G research.

The company, a smaller rival to Huawei, said the funds will come from 10 subscribers, all of which are “independent professional or institutional investors in China”.

ZTE’s shares are quoted on the Shenzhen and Hong Kong stock exchanges, but this placement will be entirely through Shenzhen shares. The sum to be raised is equivalent to almost 8% of ZTE’s current market worth according to its Shenzhen share price.

ZTE said the money – 11.5 billion renminbi – will be used for “technology research and product development relating to 5G network evolution” as well as replenishment of working capital.

Brokerage company Jefferies told the Reuters news agency this morning: “We believe the successful fund raising will remove a key overhang for the stock, and would give investors more confidence in ZTE’s R&D efforts and thus potential share gain in 5G.”

Yet the company added in its research note: “Our fundamental view remains negative, but near-term stock price could have support.”

ZTE is still emerging from a US move dating back to 2016 to penalise it for smuggling equipment to Iran via shell companies. After the company nearly closed down because supplies of US-origin hardware and software were blocked it re-emerged when it paid a $1.4 billion fine to the Washington authorities.

As a Chinese company ZTE, like Huawei, is still blocked from the US market – a situation that is likely to remain – but the company has been signing deals with a number of mobile operators.

ZTE said this morning that none of the subscribers to the new share offer will become substantial. ZTE’s market capitalisation is 145 billion renminbi ($21 billion).