The US Department of Commerce imposed restrictions on the company last year after uncovering evidence that it had traded illegally with Iran, including US-made hardware and software in its sales.
The department lifted the restrictions while negotiations went on. The current reprieve expires on 27 February – the first day of Mobile World Congress, when ZTE and its rivals will be making their biggest promotional efforts of the year to the world’s telecoms industry.
Now, according to a filing today, ZTE will have the restrictions lifted permanently – but only on payment of a hefty penalty,"including but not limited to a fine and other relevant liabilities under US laws", says the company.
Capacity has asked ZTE for a comment on the reported settlement. "For the time being, [the investor relations] announcement is all we could provide for the public," said a senior official of the company. ZTE is listed on the Shenzhen and Hong Kong stock exchanges.
According to the filing, Zhao Xianming, appointed chairman of ZTE last year, says: “The outcome of the settlement issues still remains uncertain, but will likely have a material impact on the financial conditions and operating results of the company.”
Zhao was appointed to lead the company when the US government insisted that those named on documents it released about the Iran affair had to leave their executive roles.
ZTE had to take action because its hardware included products from US companies to its worldwide customers, and the Department of Commerce threatened to block all its use of US-owned technology. Companies including Cisco, Dell, Intel, Microsoft, Oracle, Qualcomm and Symantec have been named as US-owned suppliers to ZTE. The restrictions would have hurt ZTE's sales to companies such as SoftBank, which owns Sprint, and Telefónica. ZTE is negotiating with the US Treasury and the Department of Justice as well as the Department of Commerce. The outcome “is expected to result in penalties imposed on the company by relevant US government departments”, ZTE said in its stock exchange filing.
