Telecom giant to buy 48% stake in Netas as it sees broader opportunities in the Middle East
ZTE Corp said on Tuesday it would spend up to $101.3 million to purchase a 48.04 percent stake in a leading Turkish telecom company, as the Chinese telecom equipment maker ramps up efforts to expand its business in the Middle Eastern country.
The Shenzhen-based firm said in a filing to the Hong Kong Stock Exchange that the deal, once completed, would make it the largest shareholder of Netas Telekomunikasyon AS, while 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 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 Ltd. It supplies telecom products and services to more than 160 countries and regions.
Netas, founded in 1967, posted a revenue of $371 million for the 2015 fiscal year and its customers span telecom carriers, banks, and governments agencies, ZTE said.
Xiang Ligang, CEO of the telecom industry website cctime.com, said Turkey, given its geographic location, can serve as a steppingstone for ZTE to expand in the Middle Eastern 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."
"The investment in Netas will help ZTE better localize its products and reduce the trouble of directly dealing with local clients," Xiang added.
Investors responded differently to the move by ZTE, which is listed in both Hong Kong and Shenzhen.
ZTE jumped 3.12 percent in Hong Kong to close at HK$12.56 ($1.62) on Tuesday, while its Shenzhen-traded shares declined 0.24 percent to close at 16.29 yuan ($2.38).
Fu Liang, a telecoms industry analyst, said ZTE is accelerating its global expansion, as it tries to outcompete 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, marking a 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 shipment, with a 7 percent market share, according to research firm International Data Corp.
