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ZTE Operating Revenue Up 5% to RMB 60.7 Billion

  ZTE Operating Revenue Up 5% to RMB 60.7 Billion

               Cost control drives gains in operating cash flow

Business Wire

SHENZHEN, China -- October 25, 2012

ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code:
000063.SZ), a publicly-listed global provider of telecommunications equipment
and network solutions, today announced its financial results for the first
three quarters ended September 30, 2012.

Based on PRC ASBEs, the company’s operating revenue amounted to RMB 60.7
billion, an increase by approximately 5% compared to same period a year
earlier. Net loss attributable to share holders of the parent company amounted
to RMB 1.7 billion, representing a year-on-year reverse of 259.1%. According
to the company, during the reporting period, ZTE’s operating cash flow
increased by over RMB 6 billion compared to the same period of last year.
During the period, selling and administrative expenses decreased without
impacting the company’s commitment to research and development.

Balancing cash flow, profit and operating scale

ZTE is dedicated to balancing cash flow, profitability and operating scale.
Throughout 2012, ZTE maintained its overall corporate development strategy
with a focus on current and future corporate development. However, the
tactical implementation of the company’s development methods was reviewed in
light of current global economic uncertainties and the maturing network
infrastructure market. In the third quarter of 2012, the company began
implementing optimization measures as a result of this review process.

In the future, the overall corporate development strategy of the company also
will reflect an increased focus to achieve a balance between cash flow,
profitability and operating scale. In the past several years, ZTE established
its position as a mainstream equipment supplier by penetrating major
telecommunications markets including Europe, dramatically eroding the
advantages previously held by industry leaders, allowing the company to seize
the lucrative opportunities offered by network upgrades to 4G and other
nascent technologies.

In the terminals division, the company’s smart devices won widespread
recognition in high-end markets globally, positioning its brand and technology
to seize China’s 4G market in the future. In wireless networks, the position
of the company’s FDD-LTE and TD-LTE businesses globally has improved compared
to the 3G era. In the TDD segment, ZTE is building commercial and trial TD-LTE
networks for 33 internationally leading operators in 19 countries, and the
company won the largest share in the recent TD-LTE tender by China Mobile. In
fixed-broadband, the company is keeping its globally-leading position, with
bearer network products maintaining good levels of profit margins.

In the third quarter, the balanced strategy is reaping initial benefits, with
lower selling and administrative costs leading to large-scale improvement in
operating cash flow. In the first nine months, ZTE posted a RMB 6 billion gain
in operating cash flow compared to a year earlier, as customer-mix and
receivables conditions improved. At the same time, ZTE posted a RMB 7 billion
improvement in free cash flow from the same period a year earlier, as controls
on capital spending strengthened. In terms of growth in free cash flow and
operating cash flow, the performance in the third-quarter was the best in the
past three years. ZTE is confident its cash flow will continue to strengthen
in the near term, with improved levels of profitability, while the scale of
the business will expand organically, allowing to company to achieve a top-3
position globally.

Growth in new markets: smart terminals, enterprise networks and managed
services

In terms of geographical regions and product divisions, the company’s overall
competitiveness will continue to increase as it takes advantage of its
differentiation strategy. Geographically, the company will continue to focus
on the long-term development of its business in Europe. It also will sustain
its investment in the terminal market in the United States, while maintaining
its leadership role in emerging markets. In terms of products, the company
will focus on the key areas of wireless broadband, wired broadband, bearer
networks, managed services, terminals and enterprise networks. The company
also will consolidate product lines that offer low investment returns and
limited potential.

In terms of new markets, ZTE will primarily focus on the development of smart
terminals, government and corporate clients, and managed services. ZTE will
build on its position as a global top-5 smart terminal vendor in the first
three quarters, when it posted a dramatic improvement in gross profit margin
in the terminal division. The company will continue to strengthen the
competitiveness of its products and achieve further gains in profitability. In
enterprise networks, the company will seek stable and rapid growth by
exploiting its advantages in product standardization. The company posted fast
business growth in the $200 billion managed services market.

The company will further strengthen efforts to control operating costs and
cash flow, optimize business processes, improve operational efficiency and
control potential contract risks. ZTE will manage employee numbers and
maintain its commitment to research and development, allowing the company to
exploit the window of opportunity opened by the development of LTE and other
nascent technologies.

Looking ahead, ZTE believes that after 30 years of rapid development, the
global telecommunications industry will enter a more stable growth phase, with
a trend towards increased product specialization, as operators focus more on
network efficiency and user experience. In recent years, the rapid growth of
Internet-related industries has increased demand for telecommunications
network bandwidth, prompting operators to increase investment in network
infrastructure. This is also conducive to the expansion of ZTE’s existing
solutions such as broadband bearer, broadband access and wireless broadband
networks. For smart terminals, ZTE will continue cooperating with key
international and domestic operators to drive higher revenue and profit. The
company has long been aware of the rapid and healthy growth in
telecommunications-related ICT industries. The company has been an early
investor in these vibrant “blue-sea” sectors, and provided tailored solutions
for enterprise networking, cloud-computing, and the Internet-of-Things.

The company is confident that by fine-tuning the development strategy, it can
better address current and future market challenges, and achieve steady and
robust growth.

Contact:

ZTE Corporation
Margrete Ma, +86 755 26775207
ma.gaili@zte.com.cn
or
Edelman PR
Diana Pong, +852 2837 4734
diana.pong@edelman.com
Andres Vejarano, +852 2837 4735
andres.vejarano@edelman.com