ZTE has posted revenues of RMB 63.78 billion or $10.15 billion from its Carrier Networks business and a part of this may be up for grabs as both Nokia and Ericsson are aiming for coming out of troubled times.
China is one of the main contributors to ZTE’s $10.15 billion telecom equipment revenue. Hence, a part of the $10.15 billion revenue will be available for Ericsson, Samsung, Nokia, among others.
Nokia is the number two telecom equipment maker. Ericsson is the number three telecom gear supplier. Huawei, another China-based telecom equipment firm, is the number one telecom equipment company in the world.
American technology companies cannot sell telecom components to ZTE in the next 7-years as per an American government order. This means ZTE, a leading telecom equipment maker, cannot source chipsets from Qualcomm and Intel or OS from Google or Microsoft. The US-China tension will trouble ZTE’s markets in both Europe and the U.S.
ZTE’s Consumer Business – mainly smartphones — revenue was RMB 35.21 billion or $5.6 billion. ZTE’s Government – Enterprise Business revenue was RMB 9.83 billion or $1.56 billion.
Investors are warming to mobile network makers Ericsson and Nokia as they begin to recover ahead of an uplift from a new business cycle and an unexpected boost from a U.S. ban on exports to low-cost Chinese rival ZTE, Reuters reported.
ZTE has snatched market share in Europe and the Americas, growing four times faster in those markets last year than it did its home market and acting as a drag on contract pricing and revenue growth for Ericsson and Nokia.
ZTE, which has been slapped with a potentially devastating 7-year export ban, is yet to say how it may respond to U.S. threats to cut off its supply chain.
Ericsson is due to report results on Friday and Nokia next Thursday and the focus is likely to be on next-generation 5G network upgrades expected to start later in 2018 or during 2019, ending a three-to-four year dry spell in network spending.
ZTE, meanwhile, has postponed its own quarterly results announcement, which was due on Thursday.
Ericsson shares are up 3 percent in April while Nokia has gained 6 percent. The troubles faced by ZTE are reflecting in the share price of Nokia and Ericsson. There is no good news from telecom operators for any of the telecom equipment makers.
Bengt Nordstrom, head of telecoms consultancy Northstream, said ZTE could take several months to find alternative suppliers and redesign its products, including optical and mobile gear.
Ericsson and Nokia face a tough year ahead amid weak overall market demand as telecom operators keep a tight lid on network capital spending.
“No one on this planet is ready to break the bank for 5G, even less so with a total lack of 5G business cases,” IHS Markit mobile equipment analyst Stephane Teral told Reuters. Even when 5G hits its stride sometime next decade, he warns that capital spending may never return to 4G peak levels of 2015.
Revenue for Europe’s two big network gear suppliers remains under pressure in 2018, even if they are making progress towards seeing growth stabilize in 2019, analysts at UBS said, adding this is “more so for Nokia than Ericsson, where there remains much work to be done to rationalize contracts”.
Most analysts see Nokia recovering faster than Ericsson, which, in a nutshell, is why Nokia shares are up 22 percent so far this year, while Ericsson is up just 1 percent, after the latest in a string of downbeat quarterly reports in January.
ZTE needs more action to recover its bad reputation in the telecom market due to a series of allegations from the U.S. government. US is likely to band China-based Huawei and ZTE from selling their equipments to telecom operators there citing national security issues. FCC has already made a move towards this.