ZTE reportedly inches closer to settlement with US govt

Company faces hefty fine over Iran exports

Share prices of China’s second-largest telecom equipment maker ZTE Corp dropped on Friday, after media reports said the company is nearing an agreement with the US government, including a fine of millions of dollars, over allegations it illegally exported US technology to Iran.

Reuters reported late Thursday that ZTE is close to a deal that would see it plead guilty to US criminal charges and pay hundreds of millions of dollars in penalties over allegations that it violated US laws that ban the sale of US technology to Iran, citing an unnamed source.

The company’s share prices dropped 0.32 percent to 15.57 yuan ($2.25) per share at the Shenzhen bourse at market closing, after dipping for over 1 percent in mid-day trading. The broader Shanghai Composite Index fell by 0.36 percent on Friday. Meanwhile, ZTE shares on the Hong Kong stock exchange edged down 01.43 percent to HK$12.36 ($1.59).

The company did not reply to the Global Times’ request for comment by press time.

ZTE said it would fulfill all its commitments so that it can be removed from the Entity List and was fully committed to complying with the laws and regulations of the jurisdictions in which it operates, according to a statement on the company’s website.

The company replaced several senior executives and named a new president. It also appointed a new chief export compliance officer in the US in November 2016.

In its latest stock filing released on February 14, ZTE said it is working with the US government departments on a settlement agreement, adding that the settlement could have a significant impact on the company’s operations.

The Reuters report said ZTE has not yet signed a deal with the US Department of Commerce, the US Department of Justice or the US Department of Treasury.

ZTE reportedly signed contracts to ship millions of dollars worth of hardware and software from leading US technology companies to a telecom carrier in Iran, to which the US imposes an export control rule.

Fu Liang, a Beijing-based IT expert, said settlement is usually the way out for cases of this nature.

“As the relevant parties move toward settlement, uncertainty is reduced. And it is also good to know that the US market is still open to ZTE,” Fu told the Global Times on Friday. “However, there is nothing final at this stage, so it is too early to say how big an impact it will have on the company.”

A February 15 research note by Beijing-based CSC Financial Co said uncertainties surrounding the company will be removed once the penalty is agreed upon, assigning ZTE a “buy” rating.