ZTE expands with 48% stake in Turkey telecom

As part of global expansion, Chinese smartphone giant awaits regulatory approval for latest deal

ZTE Corp said on Dec 6 that it would spend up to $101.3 million (94.4 million euros; 79.5 million) to purchase a 48 percent stake in a leading Turkish telecom company, as the Chinese telecom equipment-maker ramps up efforts to expand its business in the country.

The company, based in Shenzhen, Guangdong province, said in a filing with the Hong Kong Stock Exchange that the deal, once completed, would make it the largest shareholder of Netas Telekomunikasyon AS. The Turkish Armed Forces Foundation will hold 15 percent.

The acquisition is awaiting approval from the Competition Board of Turkey.

"Netas is one of the largest telecom system integration companies in Turkey. Its abundant local client resources will help us grow a presence there," ZTE said, adding that the transaction will be paid for with internal funds.

Founded in 1985, ZTE is the second-largest telecom equipment manufacturer in China, after Huawei Technologies Co. It supplies telecom products and services to customers in more than 160 countries and regions.

Netas, founded in 1967, posted revenues of $371 million for the 2015 fiscal year. Its customers span telecom carriers, banks, and government agencies, ZTE said.

Xiang Ligang, CEO of the telecom industry website cctime.com, says Turkey, given its geographic location, can serve as a steppingstone for ZTE to expand in the Middle East region, where demand for telecom infrastructure is rising.

"It is difficult for Chinese telecom companies to crack foreign markets on their own, due to concerns over information security," Xiang says.

"The investment in Netas will help ZTE better localize its products and reduce the trouble of directly dealing with local clients."

Investors responded differently to the move by ZTE, which is listed in both Hong Kong and Shenzhen.

The company's stock jumped 3.12 percent in Hong Kong to close at HK$12.56 ($1.62; 1.51 euros; 1.27) on Dec 6, while its Shenzhen-traded shares declined 0.24 percent to close at 16.29 yuan.

Fu Liang, a telecom industry analyst, says ZTE is accelerating its global expansion as it tries to out-compete its rivals by migrating to post-4G telecom technology and the Internet of Things market.

In the first nine months of this year, ZTE's revenue exceeded 71 billion yuan, for year-on-year growth of 4.4 percent. The firm is also seeking growth in the smartphone sector, launching both premium and budget handsets around the world.

Thanks to its inexpensive smartphone devices, ZTE has become the fourth-largest smartphone vendor in the United States by shipments, with a 7 percent market share, according to research firm International Data Corp.

masi@chinadaily.com.cn