Published: Tue, April 17, 2018
Global | By Shelia Dennis

United Kingdom telcos warned not to use ZTE network equipment

United Kingdom telcos warned not to use ZTE network equipment

When challenged by the US Department of Commerce, ZTE agreed to plead guilty to the actions.

A statement from the US Commerce Department said the ban was imposed because of false statements made by the company during talks in 2016 over a charge of shipping telco equipment to Iran and North Korea.

Secretary Ross said ZTE had made false statements before and during the investigation of their activities, had obstructed justice and had delivered false and misleading representations of the company's activities. Likewise, the ban also means that that the maker of the popular Snapdragon processor is out a revenue stream for the next seven years. This could have a devastating impact on the company given that USA companies are believed to account for 25 to 30 percent of ZTE's components to build phones and networks. The company was also supposed to revoke the bonuses of any employees involved. Trading in ZTE shares were suspended today in response.

The US government has banned American companies from selling components to China's ZTE despite reaching a $1.2 billion settlement with the telecom giant in 2017 over trade with Iran. ZTE repeatedly told the US that it was complying, but the Department of Commerce found that the offending executives were still getting bonuses, and that ZTE had never issued formal reprimand letters. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company".

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The US Department of Commerce has implemented a ban on American companies selling components to ZTE.

ZTE did not immediately respond to a request for comment. In addition to the phones it's known for in the US, ZTE makes network infrastructure equipment for carriers, cloud operations and long distance data transmission.

On Monday, the UK's National Cyber Security Centre (NCSC) warned United Kingdom telecoms firms against using equipment from ZTE due to "national security" concerns. "This egregious behavior can not be ignored", US Secretary of Commerce Wilbur Ross said.

On the same day, ZTE also received a blow from the United Kingdom government, which warned telecom companies against using the Chinese firm's equipment and services.

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USA authorities have now accused the company of breaching the terms of the settlement.

While choking the ZTE supply chain is another step towards full-scale trade war between the USA and China, this is not the only PR battle being faced by ZTE.

The ZTE action comes amid rising trade tensions between the USA and China, which could be affect Qualcomm beyond ZTE. (NYSE:T), T-Mobile US Inc.

The U.S. hit Chinese telecom firm ZTE with a potentially devastating enforcement action on April 16, prohibiting the company from doing business with American firms.

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