EXCLUSIVE: ZTE aims to become world No.3 telecom gear company

Last Updated: Fri, Nov 18, 2011 03:50 hrs
EXCLUSIVE: ZTE aims to become world No.3 telecom gear company

ZTE Corp, the world's No.5 telecommunications equipment supplier, aims to boost overseas revenue and produce more higher end telecoms and consumer products to enhance margins, its chief executive said.

ZTE, based in the southern Chinese city of Shenzhen, ranks behind Ericsson, Huawei Technologies Co Ltd, Nokia Siemens Networks GmbH and Alcatel Lucent SA in overall sales.

Even as Europe and the United States suffer from economic doldrums, the impact on ZTE is limited due to its close cooperation with major overseas telecommunications operators on selling its handphones and network gear, Shi Lirong told Reuters.

It hopes that will help boost the contribution of overseas revenue to 60-70 percent eventually from 54 percent now, the 24-year ZTE veteran said.

The group hopes its total revenue would grow by 30 percent this year, after climbing 17 percent to 70.26 billion yuan ($11 billion) last year, of which 60 percent came from equipment business and 26 percent from consumer devices including handsets, he said.

"I'm very hopeful that we'll be able to make it to the top three in future," the 47-year-old, who is an engineer by training, said in his first media interview in more than a year.

"ZTE may be No.5 now, but our business is growing the fastest among our peers," he said.

ZTE, founded in 1985 by its chairman Hou Weigui who begun the business making accordions and bulky telephone sets, has since diversified into consumer devices with its Blade and Skate smartphones, as well as its Light Tab tablet PCs.

The company has been growing rapidly in the past decade, thanks largely to its low-cost strategy. Now the firm aims to move up the value chain by pumping out more high end telecom equipment such as long-term evolution (LTE) gear, and handsets, Shi said.

In 2010, ZTE's gross profit margin for telecom equipment was up 3.55 percentage points to 38.43 percent, while margins for consumer devices products fell 5.88 percentage points to 20.26 percent.

"We've now given up quite a lot in making low-cost handphones," said Shi, who carries in his bag a Blade, a Skate and a ZTE V9 seven inch tablet PC.

"Our strategy is to raise the unit selling price of our phones. We're making a shift towards producing more smartphones by investing more in innovation and marketing," he said.

The Chinese firm had aggressively grabbed market share over the past few years by selling low-cost feature phones to overseas emerging markets, such as India and Africa.

ZTE was the fourth largest mobile phone maker in the third quarter, according to IDC.

But it was ranked by research firm Gartner as the fifth largest handset maker, with a 3.2 percent market share, far behind Nokia Oyj, Samsung Electronics Co Ltd, LG Electronics Inc and Apple Inc.

ZTE is now aiming for smartphones to contribute 30 percent of the company's total handset revenue to lift margins this year.

ZTE set a target to ship over 80 million cellphones this year, including over 10 million smartphones, higher than its crosstown rival Huawei, which also has a similar diversification strategy to capture the consumer market.

ZTE's Hong Kong-listed shares were up 1 percent as of midday on Friday, versus a 1.65 percent loss in the main Hang Seng Index.

(Editing by Charlie Zhu)

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