China firm pleads guilty, fined nearly US$900m in US sanctions case

NEW YORK/HONG KONG: Chinese telecom equipment maker ZTE Corp has agreed to plead guilty and pay nearly US$900 million (RM4 billion) in a US sanctions case, drawing a line under a damaging scandal that had threatened its cut off its supply chain.

While the fine was larger than expected, ZTE – also a major smartphone maker – reported robust underlying earnings for 2016 and was upbeat in estimates for the first quarter. That and the resolution of the case helped its Hong Kong-listed shares surge 6%.

A five-year investigation found ZTE conspired to evade US embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.

In addition, it was charged in connection with 283 shipments of telecommunications equipment to North Korea.

ZTE relies on US suppliers for 25% to 30% of its components, many of which are key to its goods.

It purchases about US$2.6 billion worth of components a year from US firms, according to a company spokesman. Qualcomm, Microsoft and Intel are among its suppliers.

“ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company,” ZTE chief executive Zhao Xianming said in a statement.

ZTE has replaced executives allegedly involved, including naming a new president.

The company said yesterday it slid to a preliminary net loss of 2.36 billion yuan (RM1.52 billion) in 2016, its first loss in four years, due to the settlement.

But without the fine, it would have logged 3.8 billion yuan in profit, 18% higher than a year earlier. – Reuters