September 26, 00763.HK announces that it will transfer its subsidiary, ZTE SoftChong Technology Co., Ltd. (hereinafter referred to as "ZTE").
"China Business News" reporter noted that on September 20, ZTE also issued a notice that it planned to sell some land property assets in Shenzhen.
ZTE is facing some financial pressure because of the activation of a refusal order by the US Department of Commerce (BIS) and the subsequent settlement agreement. Sun Yongjie, a senior analyst in the IT industry, told this newspaper that ZTE's land sales and sales of the company have nothing to do with the sanctions imposed by the US Department of Commerce and the shortage of its own funds.
The reporter asked ZTE about the reasons for the sale of this part of the assets, but as of the time of the press release, the other side has not yet responded.
Selling related assets
September 20, ZTE and Shenzhen Investment holding Co., Ltd.
ZTE said that the final transaction plan and transaction price are yet to be further negotiated and determined according to the progress of the project. It has been clearly stipulated that Shenzhen Investment Control will pay ZTE a down payment of 2.2 billion yuan within three working days after the signing of the framework agreement and the mortgage and mortgage contracts.
Shenzhen investment control official website shows that the company has strong financial resources. By the end of 2017, the total assets of the company were about 500 billion yuan, the average annual operating income was about 50 billion yuan, and the average annual profit was about 20 billion yuan.
On September 25, ZTE, Nanjing Xi Soft and ZTE Soft signed the Supplementary Agreement on Installment Arrangements, which adjusts the one-time full payment of Nanjing Xi Soft under the Share Transfer and New Share Subscription Agreement to installment payment.
Nanjing Xisoft is actually a new company founded in January 2018. The shareholders are also rich in financial resources, including Shanghai Qiwei Investment Center (Limited Partnership), Hangzhou Ali Venture Capital Co., Ltd. and Shanghai Qipeng Investment Management Co., Ltd.
ZTE Soft Chuang was listed on the list of sales by ZTE Communications in April 2017, when ZTE announced that its holding subsidiary, ZTE Soft Chuang, was listed on the national SME share transfer system.
Today, industry and commerce data show that ZTE Soft Creation has been renamed Haowhale Cloud Computing Technology Co., Ltd., which provides solutions for operators, governments and enterprises based on cloud computing, big data and artificial intelligence technology. Its main business involves telecom operation support business (BOSS business) and smart city area. Transportation (except for rail transit, RFID data acquisition, and transportation applications involving RFID data processing) and application software product development, customization and application layer system integration services for the government sector.
Sun Yongjie told our reporter that ZTE had been sanctioned by the US Department of Commerce for violating US export control regulations and selling prohibited products to Iran. ZTE Soft Creation, a subsidiary of ZTE, has nothing to do with ZTE being sanctioned by the US Department of Commerce.
In March 2017, ZTE accepted a fine of $892 million despite a settlement with the US Commerce Department. It was reported that ZTE was planning to gradually sell a number of subsidiaries, including ZTE Softbank, in order to repay the huge compensation in the United States.
On February 9, 2018, ZTE sold 43.66% of its subsidiary, ZTE Soft Chuang, to Nanjing Xiruan for $1,223.3 billion. After the transaction, ZTE only held 35.19% of ZTE Soft Chuang, which meant that ZTE no longer controlled ZTE Soft Chuang, and Nanjing Xiruan became the largest shareholder of ZTE Soft Chuang.
ZTE will pay a total of $1.4 billion in civil fines as a result of the Commerce Department's activation of the refusal order and the subsequent settlement agreement in May.
The industry believes that the above sale of real estate business up to 2.2 billion yuan in the first phase of the money can be said to be a big deal, the funds into the accounts will also to a certain extent ease the pressing urgency facing ZTE.
According to the first half of 2018 earnings report released by ZTE on August 31, net operating profit loss amounted to 7.824 billion yuan, mainly affected by prohibitions and fines.
Kang Zhao, a communications industry expert and editor-in-chief of the operator World Network, told the newspaper that the main purpose of ZTE's sale of related assets should be to solve the problem of funds. ZTE has to pay so many fines to the U.S. government, and its business has stagnated in the first half of the year. The funds need to be withdrawn. Selling existing assets is a better way.
Future focus 5G
In May, ZTE's mobile phone business was also rumored to be sold as the terminal business most affected by the Commerce Department sanctions, which was denied by ZTE. But in September, the media reported that ZTE's mobile phone business experienced a new round of layoffs, the original poor performance of the mobile phone business has experienced contraction adjustment. In this regard, ZTE terminal a public relations reporter told this newspaper, in the course of operation, according to the specific business focus on the needs of various resource allocation, the personnel involved will be based on business resource allocation to make corresponding adjustments.
ZTE said that the terminal as an indispensable part of the company's 5G core competitiveness, will continue to invest, while the terminal business will focus on improving efficiency.
At the interim shareholders' meeting of ZTE on August 28, Xu Ziyang, the new president of ZTE, said that the company is concentrating resources on 5G construction and reducing investment in non-main waterway products. At present, the company's investment of 5G mainly comes from R & D expenses and other businesses to create profits. Xu Ziyang has made an analysis of the business model of the 5G market in the future.
It is reported that ZTE had sold 85% of the shares of Shenzhen ZTE Supply Chain Co., Ltd. and 10.1% of the shares of Nubia in April and July 2017 respectively.
Kang Zhao believes that ZTE's sale of some assets is mainly based on the buyer's wishes, not on ZTE's wishes. Some buyers also want ZTE to retain some shares. The main reason is that if the seller retains a part of the shares, he will continue to do his best to let the asset company continue to do business and continue to appreciate.