ZTE replaces long-serving handset chief

In a New Year reorganisation, ZTE has sidelined He Shiyou, the long-serving head of its handset group, and replaced him with Zeng Xuezhong, currently China handset sales chief.

He, 47, has headed the devices business since 2004.

ZTE says the move is aimed at bringing new blood into senior management ranks, although Zeng is just seven years younger than He.

The move follows a decline in terminal sales over the last 18 months. Device revenue shrank 12.5% in the first half of 2013 and 4% during 2012.

ZTE also said it would spin the devices group off as a standalone unit. The division, which accounts for a third of total revenue, won't be a separate company, but will be responsible for its own procurement, R&D, sales and other functions.

ZTE, China’s second-largest telecom vendor, last year posted a 2.84 billion yuan ($470m) loss.  It has forecast a full-year profit for 2013.

A company source told Sina Tech that Zeng had replaced He because of the financial results, his age and greater grasp of the internet. Traditional handset vendors like ZTE are being challenged by new brands like Xiaomi, which skilfully use online channels, and e-commerce platforms like JD.com.

“Here the fast fish eats the slow fish,” CEO Shi Lirong is reported to have said.  "The highly efficient will destroy the inefficient... we must carry out strategic change, organisation change and cultural change."

As well as shifting He Shiyou, who keeps his role as executive director, ZTE said it would also step up its efforts in urban public IT, new energy tech and mobile internet.

In other appointments, it has tapped EVP Zhao Xianming as CTO and appointed senior VP Pang Shengqing as head of the enterprise group.

4G contracts: China Mobile throws EU firms a bigger bone

Huawei and ZTE have once again won the biggest share of a major Chinese telecom tender, despite being undercut by Nokia Siemens.

In what is certain to be the largest telecom tender this year, China Mobile handed out 20 billion yuan ($3.27b) in contracts to build its TD-LTE network in 100 cities.

Nokia Siemens surprised the industry when it was revealed during the tender that it had bid the lowest price - the first time a foreign vendor had done so. Despite that, it won no more business than other foreign players, and much less than the two large local firms.

With what appears to be immaculate stage management, Huawei and ZTE emerged with 26% each of the total tender, while the three foreign vendors, Ericsson, Nokia Siemens and Alcatel Shanghai Bell, were allocated 11% apiece. Small Chinese players Datang, Potevio, New Postcom and Fiberhome picked up the remainder.

Chinese telecom news site C114 noted that the 67% share won by local firms was down slightly from their 70% share of China Mobile's trial network last year.

The market share number is more than academic. EU Trade Commissioner Karel De Gucht has warned he would push ahead with his subsidies case against Huawei and ZTE if European firms did not win a fair share of Chinese domestic contracts.

Chinese firms have a 25% share of the EU market, according to CICC telecom analyst Chen Haofei. The 33% of these contracts that have gone to European firms are probably enough to stave off De Gucht's attentions.

As well as the size - 207,000 base stations - this contract is strategically important as the first large-scale tender for the China Mobile's 4G network. The major winners are best-placed to pick up follow-up contracts as the network expands over the next decade or so.

Huawei up, ZTE down, NSN turns a corner

A busy day for vendors: Huawei expects a profit, ZTE a loss, and the bloom could be returning to Nokia Siemens.

Huawei has defied the tough telecom gear market to report expected 33% higher income of 15.4bn yuan ($2.48bn), with sales up 8% to 220.2bn yuan ($35bn).

It has forecast revenue to rise 10-12% in 2013.

The non-core divisions maintained their contributions. While the telco business accounted for 72.8% in sales (up 6.8% over 2011), the consumer division - which includes handsets and modems – made up 22.0% (up 9.3%) and the enterprise group 5.2% (up 25%).

Offshore sales accounted for 66% of total sales, down from 67.9% in 2011.

CFO Cathy Meng said the company had had kept general expenses under control, allowing it to “allocate more resources to bolster the front line and ensure continuous improvements on customer delivery and service quality.”

ZTE‘s expected loss wasn’t such a huge surprise, given its trying year, although investors still marked its stock down 1.63%.

ZTE said it expects a full-year loss of 2.5bn-2.9bn yuan ($379m-$439m). Operating revenue fell 18% in the last quarter and margin shrank by 11 points as a result of it chasing low-margin contracts in Africa, South America, Asia, and China.

As in previous quarters ZTE attributes the loss to an array of factors, “including postponed execution of systems contracts, decrease in revenue from terminals in the domestic market, and delayed progress of international projects.”

Meanwhile, Nokia Siemens is planning a bond issue in the next quarter – its first ever foray into the public finance markets, FT.com reports.

It aims to raise as much as €700m ($932m) with high-yield bonds to pay down bank debt and fund future investment, paper says.

The move is significant given the potential for a future flotation of the business, which has been recently rejuvenated by its parents. Nokia and Siemens talked to private equity groups about a sale of NSN last year but failed to strike a deal, forcing the groups to bolster its balance sheet with a further €1bn of equity.

Helped by that equity injection, steep cost cuts and asset sales, NSN has tallied “three consecutive quarters of underlying profitability for the first time in its history. That has led to renewed talk among financiers about a potential flotation or sale next year.”

Here comes Nubia, ZTE's new smartphone brand

Fresh from celebrating its elevation into the smartphone top four, ZTE next month plans to unveil a new smartphone brand.

Click to read more ...

Whoa, Huawei & ZTE say they're not spies

Who saw this coming? Huawei and ZTE appeared before a Congress committee and denied spying on the US.

Here's the money quote from Mike Rogers, chair of the House of Reps intelligence committee:

"Our sources overseas have told us that there is a reason to question whether the companies are tied to the Chinese government or whether their equipment is as what it appears," he said.

Not only does he have no specific information, he doesn't even have a specific allegation. The phrasing puts as much distance as possible between himself and an actual position. This is a guy with the world's largest intelligence-gathering machine at his disposal.