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ZTE still in $1bn loss despite resumption of US business

Sanctions continue to bite, as company expects red ink for full year

ZTE was barred from doing business with U.S. companies for three months.   © Reuters

GUANGZHOU -- Chinese telecommunications equipment maker ZTE posted a net loss of 7.26 billion yuan ($1.05 billion) for the January-September period, with the impact of U.S. sanctions continuing to weigh on earnings.

The loss shrank from the January-June period by roughly 5 billion yuan as business resumed after the ban on purchasing U.S. parts was lifted in mid-July. But ZTE still expects to book a full-year loss of between 6.2 billion yuan and 7.2 billion yuan, the company said Thursday.

ZTE was forced to suspend almost all of its operations for the three months from mid-April after the U.S. punished the telecom equipment vendor for violating restrictions on technology exports to Iran and North Korea.

Barred from doing business with U.S. suppliers, the Shenzhen-based company quickly became unable to procure semiconductors for its mainstay products -- telecom equipment and smartphones -- bringing production to a halt. Sales of smartphones were suspended as well.

Since the U.S. ban was lifted in mid-July, ZTE has beefed up marketing of its bread-and-butter products, including smartphones. The company brand was badly damaged, however, with some corporate clients switching to other manufacturers.

Sales dropped 23% on the year to 58.7 billion yuan in the nine-month period. Looking at the July-September quarter alone, sales sank 14% and net profit plunged 65%.

The U.S. remains wary of ZTE. A U.S. district court decided early this month that a court-appointed monitor charged with assessing ZTE's compliance with U.S. export restrictions will remain in place until 2022, longer than the initially planned 2020.

The U.S. and Australia have prohibited ZTE and Chinese peer Huawei Technologies from entering their respective markets for fifth-generation mobile communications, citing security concerns.

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