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MarketScreener Homepage  >  Equities  >  SHENZHEN STOCK EXCHANGE  >  ZTE Corporation    000063   CNE000000TK5

ZTE CORPORATION

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Exclusive: Trump expected to sign order paving way for U.S. telecoms ban on Huawei

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05/15/2019 | 08:23am EDT
FILE PHOTO: Signage is seen at the Huawei offices in Reading

WASHINGTON (Reuters) - President Donald Trump is expected to sign an executive order this week barring U.S. companies from using telecommunications equipment made by firms posing a national security risk, paving the way for a ban on doing business with China's Huawei, three U.S. officials familiar with the plan told Reuters.

The order, which will not name specific countries or companies, has been under consideration for more than a year but has repeatedly been delayed, the sources said, asking not to be named because the preparations remain confidential. It could be delayed again, they said.

The executive order would invoke the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. The order will direct the Commerce Department, working with other government agencies, to draw up a plan for enforcement, the sources said.

If signed, the executive order would come at a delicate time in relations between China and the United States as the world's two largest economies ratchet up tariffs in a battle over what U.S. officials call China's unfair trade practices.

Washington believes equipment made by Huawei Technologies Co Ltd, the world's third largest smartphone maker, could be used by the Chinese state to spy. Huawei, which has repeatedly denied the allegations, did not immediately comment.

The White House and Commerce Department declined to comment.

Chinese Foreign Ministry spokesman Geng Shuang said during a daily briefing in Beijing on Wednesday that the United States had been "abusing its national power" to "deliberately smear" and suppress certain Chinese companies.

"This is not honourable, nor is it just," he said.

"We urge the United States to stop using the excuse of security issues to unreasonably suppress Chinese companies, and provide a fair, just, non-discriminatory environment for Chinese companies carrying out normal investments and operations in the United States."

The United States has been actively pushing other countries not to use Huawei's equipment in next-generation 5G networks that it calls "untrustworthy." In August, Trump signed a bill that barred the U.S. government itself from using equipment from Huawei and another Chinese provider, ZTE Corp.

In January, U.S. prosecutors charged two Huawei units in Washington state saying they conspired to steal T-Mobile US Inc trade secrets, and also charged Huawei and its chief financial officer with bank and wire fraud on allegations that the company violated sanctions against Iran.

The Federal Communications Commission in April 2018 voted to advance a proposal to bar the use of funds from a $9 billion government fund to buy equipment or services from companies that pose a security threat to U.S. communications networks.

Federal Communications Commission chairman Ajit Pai said last week he was waiting for the Commerce Department to express views on how to "define the list of companies" that would be prohibited under the FCC proposal.

The FCC voted unanimously to deny China Mobile Ltd’s bid to provide U.S. telecommunications services last week and said it was reviewing similar prior approvals held by China Unicom and China Telecom Corp.

The issue has taken on new urgency as U.S. wireless carriers look for partners as they rollout 5G networks.

While the big wireless companies have already cut ties with Huawei, small rural carriers continue to rely on both Huawei and ZTE switches and other equipment because they tend to be cheaper.

The Rural Wireless Association, which represents carriers with fewer than 100,000 subscribers, estimated that 25 percent of its members had Huawei or ZTE equipment in their networks, it said in an FCC filing in December.

At a hearing Tuesday, U.S. senators raised the alarm about allies using Chinese equipment in 5G networks.

The Wall Street Journal first reported in May 2018 that the executive order was under review. Reuters reported in December that Trump was still considering issuing the order and other media reported in February that the order was imminent.

(Reporting by David Shepardson, additional reporting by Chris Bing and Diane Bartz, Michael Martina in BEIJING; Editing by Sonya Hepinstall and Nick Macfie)

By David Shepardson

Stocks treated in this article : China Mobile Ltd., ZTE Corporation
Stocks mentioned in the article
ChangeLast1st jan.
CHINA MOBILE LTD. 1.80% 73.4 End-of-day quote.-1.41%
ZTE CORPORATION End-of-day quote.
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Financials (CNY)
Sales 2019 98 934 M
EBIT 2019 5 858 M
Net income 2019 4 638 M
Finance 2019 1 671 M
Yield 2019 1,00%
P/E ratio 2019 25,67
P/E ratio 2020 19,17
EV / Sales 2019 1,09x
EV / Sales 2020 0,91x
Capitalization 110 B
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Mean consensus OUTPERFORM
Number of Analysts 21
Average target price 31,6  CNY
Spread / Average Target 12%
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Managers
NameTitle
Ziyang Xu Chief Executive Officer & Executive Director
Da Xiong Xie Chairman-Supervisory Board
Zixue Li Chairman
Li Ying Chief Financial Officer & Executive Vice President
Hui Jun Xu Chief Technology Officer & Executive VP
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