ZTE sets sights on leading global role

By Shen Jingting (China Daily) Updated: 2012-08-30 09:20

During the same period, the world's telecom industry suffered two major downturns. One occurred around 2002, when major telecom carriers across the world had just finished second-generation network development and had not yet started the large-scale purchase of third-generation infrastructure.

Rivals such as Ericsson and Huawei posted negative revenue growth in 2002. ZTE, however, escaped the fallout. It realized a modest earnings increase during the period because products using the CDMA mobile phone standard bore fruit and won significant contracts from the domestic market.

The other industry downturn was after the 2008 global financial crisis. Because many telecom carriers faced financial pressure and tightened their budgets, telecom equipment makers experienced another tough period.

Europe and the United States were the home markets and biggest revenue sources for many foreign rivals such as Ericsson and Alcatel-Lucent. After 2008, the developed countries' smaller markets prompted some companies to cut jobs and caused losses.

In contrast, ZTE rose quickly by benefiting from the construction of China's vast 3G networks since 2008. It grabbed the biggest market share - 36 percent - of China's 3G network infrastructure market in 2009, Hou said.

Obviously, the financial crisis meant more opportunities for ZTE than risks, analysts point out. "The prolonged global financial instability and difficulties over the last several years helped differentiate the low price, high performance value propositions of the Chinese vendors," Cheung said.

"The financial crisis challenged different companies in different ways," Hou said. Because of high costs, the products from foreign telecom equipment vendors were less attractive. Fewer sales resulted in slower technology upgrades, which further hurt their market positions. "As foreign rivals were losing market share, it created room for ZTE to catch up," Hou added.

Overseas expansion

ZTE has operated in overseas markets for about 17 years. The company started to export a few of its products in 1995. From 1998, it began to acquire contract projects and was able to ship products in large quantities to overseas markets.

Shi Lirong, chief executive officer of ZTE, said the company adopted a new marketing strategy in 2006 by strengthening cooperation with multinational telecom operators. "We cooperate with them in both emerging markets and mature, developed countries," Shi said.

There are hundreds of telecom operators in the world but only 20 percent of them, about 30 operators, are in big demand. "Whoever takes the biggest share of contracts from those operators is likely to become the biggest winner," Shi said.

In addition, ZTE focuses on expansion in some big countries and regions, such as the European and North American markets, Japan and the BRIC countries (Brazil, Russia, India and China). Hou said big countries have big populations and economies, which provides opportunities for enormous investment in network infrastructure.

"Overseas markets may eventually account for as much as 80 percent of ZTE Corp's total sales," Hou said. ZTE's overseas revenue reached 46.76 billion yuan, or 54.2 percent of its total revenue, in 2011, from 4 percent 10 years ago. The figure will continue to grow, but Hou did not predict when ZTE will realize the 80 percent goal.