ZTE in Financial Mess, Messing up Ethiopian Network (Mesfin Abera)
ZTE, the Chinese multinational telecommunications equipment and systems company, released its latest financial returns in March26, 2014. ZTE said that it has turnaround with a profit of RMB 1.36 billion compared with aloss ofRMB 28.4 billion a year before. However, ZTE’s 2014 revenue dipped 10.6 percent to 12.11 billion (RMB 75.2 billion) and its business profit which represent the state of the company’s main work had still a deficit of RMB 1.5 billion. The profit depended on the revenue of RMB3.3 billion out of business (mainly from software drawback, government subsidy and property sell which gave ZTE a profit of RMB 0.85 billion. However, despite releasing this achievement of making a profit instead of suffering a loss, ZTE didn’t change its declining trend in the stock market. Its value in stock exchange is RMB 12.75 per share with a 0.23% dip and the price in HK stock exchange is HKD 15.12 per share with a 2.3% dip. The market shows thatZTE‘s main business did not restore really.Its improvement is mainly obtained from cost control.
According to its geographic division, ZTE’s business revenue of Asia, Africa, Europe regions dipped significantly. Especially the revenue got from Africa region is RMB 5.8 billion with a 24.99% dip. The staff numbers reduced from 78402 at the end of 2012 to 69093 at the end of 2013. The staff reduction is 12% with the same percent of revenue dip. And the per-efficiency didn’t show any improvement. ZTE’s situation has been reflected obviously in Ethiopia.ZTE’s staff numbers in Ethiopia was reduced from about 400 to 200.
For Ethiopia this year is the last year of the GTP. To realize the GTP for the telecommunication subsection, Ethio Telecom carried out a project for network expansion and improvement. The telecom expansion project in addition to ZTE is share by another Chinese telecom company Huawei. It is a crucial time that ZTE is needed to put its resource in Ethiopia. However, instead of responding actively to this need, ZTE hasn’t yet had any contribution in the expansion project delivery. ZTE delayed the signing of the contract and now postponing the delivery. To the contrary, the company is even reducing the staff number in Ethiopia.
With this kind of investment, industry experts doubt if ZTE really have the determination and ability to deliver the expansion project in Ethiopia. Are these 200 staffs enough for the delivery? Is ZTEshowing responsibility for the project? It is the time which needs ZTE allocate the resources and investment to deliver the project which it has signed. ZTE has almost done nothing to the project. Seeing ZTE’s passive attitude, there is a growing doubt if ZTE has the ability and commitment to deliver the expansion project.
Previously ZTEwas the exclusive supplier of the original telecom network in Ethiopia. But the quality of the network is very poor and has received so many complaints from subscribers. It is obviously questionable if Ethio Telecom can improve the network quality engaging a ZTE with its poor track record and financial difficulty. According to ZTE financial report, the cost of R&D in 2013 is decreased by 16%. This will lead further to a decline in quality of ZTE’s products. If the expansion project target is not realized because of ZTE’s passive act, ZTEwill be responsible for it.Given its delayed and poor implementation in the first phase of the expansion project, it will be like wishing a cold day in hell to expect any improvement in the company’s performance.