ZTE fears US action could hit results

Chinese telco outfit ZTE fears that penalties it expects to incur for allegedly breaking US sanctions against Iran will be a kick in the bottom line.

In March, the US government hit ZTE with some of the toughest-ever US export restrictions for the alleged breaches. It has since issued temporary reprieves on the curbs, which are now due to take effect next month.

ZTE said in a filing to the Shenzhen Stock Exchange said that it had been actively cooperating and communicating with relevant U.S. government departments to reach a conclusion of the investigation.

“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.”

Measures it has taken to placate Washington include a management overhaul and the appointment of a new chief export compliance officer based in the United States.

If no settlement or reprieve extension were reached before the deadline, US suppliers would be banned from doing business with ZTE, which could cut off much of the Chinese company’s supply chain. ZTE relies on US suppliers for about one-third of its components.