ZTE sets its sights on Europe

ZTE Corp plans to strengthen its position in the European market in the fields of telecom infrastructure, smartphones and government and enterprise solutions, according to company officials.

Since being established in China's southern coastal city-Shenzhen in 1985, ZTE has grown into a telecom-hardware giant—the fourth-largest mobile phone maker by shipments and fifth-largest telecom equipment maker by sales - competing with the likes of Sweden's Telefon AB L.M. Ericsson and Paris-based Alcatel-Lucent.

Because of a global decline in telecom carrier spending on network construction, ZTE diversified its core businesses in recent years to explore new markets, such as mobile phones and enterprise IT solutions.

Last year, its overseas revenue was nearly 47 billion yuan ($7.5 billion), 54.2 percent of its total revenue. The European and North American market grew the most last year—42.2 percent year-on-year to 20.45 billion yuan.

With nearly one-fourth of its revenue coming from Europe and the US, it has become increasingly dependent on the growth there, Dai Shu, director of corporate branding and communications at ZTE, told China Daily.

"ZTE aims for a steady increase in market share in European countries," Dai said. The European market is mature and well-regulated. Meanwhile, many European-based telecom operators, such as Telefonica and France Telecom, conduct business globally, and may introduce extensive business opportunities for ZTE.

"Since European-based telecom carriers combined occupy more than half of the world's telecom network market, ZTE will benefit in the short and long run from cooperation with those multinational operators," Dai said.

Compared with the United States, where authorities prevented ZTE from cooperating with major carriers because of political concerns, the European market is "more open and friendly to foreign telecom players", Dai said.

As early as 2000, ZTE had set up offices in various European countries. However, they didn't really take off until 2006 to 2007, when it finally won the trust of the major European telecom carriers.

ZTE employs around 1,000 people in Europe, more than 60 percent of whom are citizens of the countries where they work.

ZTE's telecom system equipment has been implemented by nine of Europe's top 10 operators, according to its 2011 financial report. The company is also seeking to provide telecom operation services to European customers, said He Shiyou, ZTE's executive vice-president, at the company's annual analyst conference in Shenzhen last month.

But ZTE's most notable business in Europe remains in consumer devices. It was the world's fourth mobile phone vendor in the fourth quarter last year, shipping 18.9 million units, according to research firm Gartner Inc.

It could be shipping 100 million smartphones a year by 2015, according to Reuters.

Europe will be a major target market for its mid-level to high-end smartphones as it tries to reverse a decline in its gross profit margin, He said.

"We'll do more promotions for our mobile phones in Europe this year," Dai said. ZTE is boosting advertising because many European consumers still know little about the company.

By cooperating with local carriers, it has secured about a 10 percent share of the mobile phone market in many European countries. Sales of the Blade 880, a ZTE entry-level smartphone, have approached 10 million units worldwide since it debuted in the United Kingdom in late 2010.

ZTE's third focal point in Europe is said to be the government and enterprise businesses, specifically, in telecommunication and IT solutions to clients from governments and the energy, transportation and education industries.

Xu Ming, ZTE vice-president, said the company is aiming for more than $6 billion in government and enterprise business sales by 2015, up from $1.6 billion last year. Overseas markets are likely to contribute more than 60 percent of its total government and enterprise business sales by 2015, he added.