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Technology

ZTE shakes off US sanctions to mark profit in first of half of 2019

Brisk carrier-network business pushes 13% revenue growth

ZTE was allowed to restart operations and build supplier relationships after it paid a penalty of $1 billion to the U.S. (Photo by Takashi Kawakami)

HONG KONG (Nikkei Markets) -- China's ZTE recorded a profit in the first half of 2019, as the company recovered from the impact of U.S. sanctions imposed last year that saw the telecommunications equipment maker pay a hefty penalty.

Net profit for the six months ended June stood at 1.47 billion yuan ($205.23 million), as compared to a 7.82 billion yuan loss a year ago, the company said in an exchange filing. Revenue grew 13.1% on year to 44.61 billion yuan on the back of strong growth in carrier networks, as well as government and corporate businesses.

Expenses plunged nearly 95% to 7.21 billion yuan during the period, according to the filing.

ZTE is just recovering from the U.S. sanctions that banned the company from doing business in the country between April and June last year. It was allowed to restart operations and build supplier relationships only after it paid a fine of $1 billion.

The ban, which came into effect after ZTE was accused of breaching the U.S. trade embargo with Iran, prevented the company from buying U.S. components that were key to its business.

As a result, the company reported one of its worst half-year losses last August.

Rival Huawei Technologies is also dealing with the effects of draconian U.S. trade restrictions. In mid-May, Washington blacklisted the company, cutting off access to a list of U.S. components and technology.

Amid waning business prospects in the U.S., Chinese telecom equipment vendors are gearing up for a faster rollout of next-generation cellular networks on the mainland. China had in June given the go-ahead for the commercial deployment of 5G services in the country to four Chinese companies, months ahead of expectations.

In the second half of 2019, the company will persist in innovation in the 5G business, ZTE said. The company will also "continue to develop multiform 5G terminal products and engage in active cooperation with carriers on 5G terminals, while vigorously exploring multiple market channels," the company said.

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