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Shares in Chinese telecommunications group ZTE shot up on Wednesday after the company agreed to plead guilty to violating US sanctions on Iran and North Korea and to pay a $1.2bn fine, the largest penalty of its kind.
ZTE shares were up 5.4 per cent in Hong Kong during early trading, while Shenzhen-listed shares were under a trading halt.
In a filing to the Hong Kong stock exchange, ZTE said it had agreed to pay a $892m fine for violating US export control laws. Of this fine, $100.8m will be paid immediately to the Office of Foreign Assets Control of the US Department of Treasury immediately, while a $430.5m fine will be paid to the US Department of Justice pending court approval – followed by $361m to be paid to the US Department of Commerce.
A further $300m fine to the Department of Commerce will be suspended for seven years on condition that ZTE complies with agreed-upon requirements.
ZTE chairman Zhao Xianming said:
The Company has taken an overhaul of its organisation and structure, business procedures and internal control, and has taken necessary measures to ensure the Company’s compliance with U.S. export control laws and performance of its obligations under the Agreements.
ZTE reported a loss of Rmb2.35bn in the year ended December 2016, against a Rmb3.21bn profit in 2015. The company said it would have recorded net profit for the year at Rmb3.83bn – an increase of 19.2 per cent on 2015 – had it not made a provision for the US fine, as it saw increased revenue from carriers’ networks and its consumer business.
The company reported operating revenue in 2016 grew 1 per cent on the previous year to Rmb101bn.
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