ZTE’s European Success: What’s the Story?

Peter Jarich

Peter Jarich – VP, Consumer Services and Service Provider Infrastructure

Summary Bullets:

  • This week, ZTE announced 5G network testing trials in Europe with Wind Tre and Orange, building on previous high-profile work with Telefonica and Telenet.
  • Financial stability when compared with its European vendor counterparts could explain the success, but the story goes much deeper, including the right 5G strategy and targeted marketing.

This week, ZTE announced its Q3 2017 earnings. For the most part, the results weren’t too surprising. Revenues for the first nine months of 2017 were up (though down in Q3 2017 compared to 2016). Profits were up significantly. The company did not report on the geographic makeup of its revenues, but if they resembled the vendor’s mid-year results, it’s safe to assume that China continues to the biggest contributor to ZTE’s sales; it was ~60% of mid-year revenues and the most profitable of the reported regions.

So, when ZTE also announced new mobile broadband wins in Europe this week – Wind Tre and Orange – it was good news for the vendor. Diversification is something ZTE needs. Diversification in a relatively large market like Europe is even better. But, it does beg the question of how ZTE pulled this off. After years of trying to break into Europe, why the recent momentum?

  • Stability in an Unstable Market. and how ZTE’s comparative success could be blamed on anything from its position in China to a broad product portfolio. Just as important, however, was the fact that telecom spending is in a period of weakness, impacting competitors and positioning ZTE as stable by comparison. As operators (in Europe oy anywhere else) look for 5G partners they can count on through the long-term, stability plays to ZTE’s favor.
  • The Right Products (and Services). In our last set , ZTE was positioned as a market Leader. Why does that matter to 5G success? Because there are no 5G solutions yet. There are LTE solutions which will scale to support 5G in the future. Those include features like FD-MIMO support (linked recently to work with ). Beyond its RAN assets, though, ZTE’s recent push on services may be just as important. 5G, after all, has been positioned as an opportunity for service providers to transform the breadth of their networks and engage with new user constituencies in the process. They’ll obviously need help in doing so and a focus on new service offers – like the – sends a signal that ZTE is ready to help.
  • European Marketing. ZTE’s Digital Operations launch took place at its Global User Congress in Brussels, an event where – not coincidentally – it played up its work with various European operators. While recent 5G-related wins might be newsworthy, they are far from isolated events. Every additional win, in turn, helps bolster ZTE’s visibility – particularly when accompanying events specifically aimed at evangelizing to the market.

Is any of these a “silver bullet,” accounting for ZTE’s success in Europe?

Probably not. No matter the financial difficulties its chief LTE rivals are facing, competition in the LTE and 5G spaces remains intense with differentiation on the product, marketing and service front often being fairly narrow. ZTE’s recent wins are more than just a happy coincidence, but it will need to keep fighting to maintain the momentum.

 

About Peter Jarich
Peter is Vice President for the Current Analysis Consumer and Infrastructure services. Peter and his analyst team monitor and evaluate activities in the markets for Consumer Services and Devices, Digital Media, Fixed Access, IP Services, Mobile Access, and Transport and Routing Infrastructure, Telecom Vendor Services, and overall coverage of the Mobile Ecosystem.

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