Caixin
Feb 15, 2017 02:33 PM
BUSINESS & TECH

ZTE Faces Possible Large Fines in Iran-Sales Settlement

Telecom equipment maker ZTE Corp. has said that a U.S. investigation into charges that it sold products to Iran in violation of U.S. sanctions is wrapping up, and that the company is likely to face a significant fine. Photo: IC
Telecom equipment maker ZTE Corp. has said that a U.S. investigation into charges that it sold products to Iran in violation of U.S. sanctions is wrapping up, and that the company is likely to face a significant fine. Photo: IC

(Beijing) — Telecom equipment maker ZTE Corp. said it is working with Washington investigators to conclude a multiyear probe into sales that violated U.S. sanctions against Iran, and that big fines could be part of a settlement.

The U.S. Department of Commerce opened its probe into ZTE as early as 2012 on suspicion that it had used shell companies, third-party partnerships and other methods to circumvent U.S. sanctions aimed at punishing Iran for its nuclear development program.

The department found ZTE guilty in the matter a year ago and announced a potentially crippling punishment that would have prevented the company from purchasing software and components from most of its U.S.-based suppliers. But ZTE has since agreed to cooperate in the investigation, prompting the Commerce Department to temporarily suspend the punitive measures.

Since the punishment was first announced, ZTE has received four temporary reprieves from the measures, each lasting three months. The most recent of those was granted in November, and is set to expire on Feb. 27.

ZTE hinted in its latest announcement on the matter that the probe could be winding down and a final settlement announced, according to a filing to the Hong Kong Stock Exchange on Tuesday. ZTE said it is currently negotiating with the Commerce Department, the Justice Department and Treasury Department on a settlement and penalties that it would include.

“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,” ZTE said in the statement. The company is set to announce its fourth-quarter and full-year results for 2016 on March 23.

Media reports from when the ZTE probe was first revealed in 2012 also said that crosstown rival Huawei Technologies Co. Ltd. was being investigated for similar violations. But neither the U.S. nor Huawei has commented on the matter in recent years, including on whether a probe is still in progress.

Contact writer: Yang Ge (geyang@caixin.com)

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