SHENZHEN- on Friday, June 29, 2018- Chinese telecoms, ‘ZTE Corp’ announced that a new board in a radical management shakeup would be as part of a $1.4 billion deal with the United States. Li Zixue, being elected as the company’s new chairman, which ZTE announced in exchange filings late on Friday evening.
The company, which ceased major operations after the ban, has also agreed to pay a $1 billion penalty and put $400 million in an escrow account as part of the deal to resume business with U.S. suppliers – who provide almost a third of the components used in its equipment.
ZTE’s new chairman, Li aged54, was previously the Communist Party secretary at a unit of China Aerospace Science and Technology Corporation which is the largest state-owned shareholder of ZTE’s parent Zhongxingxin, his biography shows.
Some investors and analysts have questioned whether a brand new board and management team can settle in quickly enough and lead the company out of the woods. The uncertainty over the ban amid intensifying U.S.-China trade tensions has hammered ZTE shares, which have cratered 60 percent since trading resumed earlier this month following a two-month hiatus, wiping out more than $11 billion of the company’s market valuation.
ZTE employee, who declined to be named due to the sensitivity of the issue, said, “I am most interested to see how well the new board will manage the company, as well as their technical expertise in telecoms. I don’t know how experienced they are in both these respects”.
Cai Manli and Yuming Bao were selected to the board, which all were nominated by Zhongxingxin, a state-owned entity which has a 30.34 %stake in ZTE.
ZTE said in filings, “shareholders approved board to apply for 30 billion yuan ($4.54 billion) credit line from Bank of China, as well as $6.0 billion credit line from China Development Bank”.