ZTE says Indian mobile operator clients to face service issues

The recent 7-year ban by the US Commerce Department has started impacting ZTE’s ability to provide services, such as repairs to telecom infrastructure, to customers in most countries and regions, Reuters reported.

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ZTE provides services for 100 million users in India, 300 million users in Indonesia, and 29 million users in Italy. ZTE is one of the main suppliers to some of the telecom operators in India including Airtel and BSNL. Both Airtel and BSNL are yet to make any complaints about service issue by ZTE.
ZTE and China Unicom IMS project
ZTE does not have a strong smartphone market in India though it earlier tried to bring out its advanced smartphones.

Earlier, ZTE notified that it stopped its operations due to the seven-year ban on American companies’ supplies to its business.

US business to feel pressure

In fact, the ban is impacting some of the US-based technology companies, which supply components to ZTE, as well. The news report by Reuters said ZTE paid over $2.3 billion to 211 U.S. exporters in 2017.

ZTE paid over $100 million each to Qualcomm, Broadcom, Intel and Texas Instruments, an official with ZTE said.

China-based ZTE is the world’s fourth largest telecom equipment maker behind Huawei, Nokia and Ericsson. ZTE relied on U.S. companies such as Qualcomm and Intel for components to make its mobile phones and telecom equipment for telecom operators globally.

ZTE paid over $100 million each to other U.S. suppliers in 2017 including chip makers Xilinx and optical component company Acacia Communications and memory chip maker Sandisk.

American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE’s equipment, which includes smartphones and gear to build telecommunications networks.

The U.S. ban prevents ZTE from using some Qualcomm processors and Android devices with Google Mobile Services software.

Qualcomm last month said it expected lost sales to ZTE to lower its earnings by 3 cents per share in the current quarter.

ZTE is not among Qualcomm’s publicly disclosed largest customers, which include Apple, Samsung Electronics and Chinese smartphone makers Oppo and Vivo.

ZTE faces penalties

In March last year ZTE paid nearly $900 million in penalties for exporting U.S. technology to Iran and North Korea in violation of sanctions.

In April this year, the Commerce Department found ZTE had violated the terms of last year’s settlement and banned U.S. companies from providing exports to ZTE for seven years. As a result, ZTE suspended its main operating activities earlier this month.

ZTE’s action plans

China has requested that President Donald Trump back off his threat of tariffs on Chinese imports, treat Chinese investments equally under U.S. security reviews, and reassess the ban on ZTE.

A May 1 formal request by ZTE to the U.S. Commerce Department for an immediate stay of the April 15 ban went unheeded. The order was causing “irreparable harm” to the company and partners, as well as millions of consumers, including those who own its phones and major network operators.

The Reuters report said Commerce Department ban on U.S. suppliers was discussed when a delegation led by U.S. Treasury Secretary Steven Mnuchin met with Chinese officials in Beijing last week.

Chinese Vice Premier Liu He is expected to resume trade talks with the Donald Trump administration this week, after discussions in Beijing last week yielded no agreement on a long list of U.S. trade demands.