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Iran blamed for ZTE's 260 PER CENT profit slump

Chinese tech giant will close loss-making offices

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Under-fire Chinese telecoms kit maker ZTE has warned it will report a loss of up to 1.75bn yuan (£174m) for the first nine months of the year, blaming a slowing global economy and the Iranian market, where US investigators are probing its activities.

The Shenzhen-based firm’s preliminary financials for the first three quarters of 2012 reveal a potential drop in revenue of over 260 per cent from the same period last year.

It said the poor results were a combination of several factors, including reduced investment in infrastructure by overseas operators because of a slowing economy and lower margin contracts in regions such as Africa.

In a separate filing to the Hong Kong Stock Exchange, ZTE added that its “operating results were adversely affected by the Iranian market”.

Those operations remain contentious in other ways, as Washington is still investigating whether ZTE broke embargoes by selling US products on a 900-page ‘packing list’ to Iran and then deliberately tried to cover its tracks when exposed by media reports.

ZTE claims that it “always respects and complies with international and local laws wherever it operates” and that – like Shenzhen rival Huawei – it is winding down its business in Iran.

However the repercussion are already being felt, with Cisco reportedly ending all sales agreements with the Chinese firm.

Another barrier to its attempts to move back into profitability will be last week’s report by a House of Representatives Intelligence Committee which concluded that ZTE and Huawei's network infrastructure tech poses a national security risk to US companies.

Apart from seemingly blocking off this revenue stream until further notice, the high profile report may also interfere with ZTE’s attempts to build its handset brand in the massive North American market.

The Chinese company said it would try and turn around its fortunes by lowering selling costs and R&D expenses; closing offices that record losses for a long time; expanding its mobile device business in Europe and America; and exploring wireless and wired broadband opportunities in China and the Asia-Pacific region. ®</p

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