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16 Jan, 2020 10:19

China's ZTE wants to raise $1.7 billion to boost 5G development

China's ZTE wants to raise $1.7 billion to boost 5G development

One of China's largest producers of telecom equipment, ZTE, has announced plans to raise around $1.7 billion from a private share placement to fund research and development of 5G networks.

The company will issue 381 million A-shares denominated in the Chinese yuan and traded on the Shanghai and Shenzhen stock exchanges. It will sell them to 10 independent professional or institutional investors in China at 30.21 yuan ($4.40) per share.

The price is a little lower than the average trading price over the last three weeks. As of Thursday, ZTE stock was trading at 37.41 yuan per share in Shenzhen.

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"High levels of investment in research and development ensure its technological competitive edge and develop its main products and businesses with core advantages," ZTE said in a statement on Thursday, adding that the fundraising could help it secure its position on the global market.

The listing amounts to nearly nine percent of the Chinese equipment maker's share capital and will be subject to a 12-month lock-up period.

Unlike another Chinese equipment maker, Huawei, ZTE was not included in the US "Entity List" last year, which forbids American businesses from dealing with named companies without special government permission. ZTE previously found itself in a situation similar to Huawei, when in 2016 the US Commerce Department blacklisted the company over allegations that it re-exported US goods to sanctioned countries. The restrictions were lifted after the corporation agreed to a plea deal and paid a fine of nearly $900 million.

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However, the US government is forbidden from using equipment from either Huawei or ZTE. According to the ban, which took effect in August, US state agencies – namely the Defense Department, General Services Administration, and NASA – are prohibited from buying products or services, as well as extending or renewing contracts with certain Chinese tech companies, unless they are granted a waiver.

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