Struggling telecom equipment maker ZTE Corp. is reportedly getting a new lease on life from the U.S.
ZTE, based in Shenzhen, China, signed an agreement over the weekend that could lift the seven-year ban that the U.S. Commerce Department imposed on the company from buying from U.S. suppliers. The new agreement could help ZTE resume operations, according to a report from Reuters citing sources familiar with the matter.
China's number two telecom equipment provider in April was slapped with a ban after it was determined that the company broke a 2017 agreement with the U.S. after it illegally shipped U.S. goods to Iran and North Korea. ZTE has since shuttered its major operations.
A ZTE spokesperson could not be reached for comment by CRN. A Commerce Department spokesman told Reuters that “no definitive agreement has been signed by both parties.”
President Trump in May offered a helping hand to the failing Chinese firm, proposing a plan in which ZTE could pay a $1.3 billion fine, change its management and board of directors, and provide the U.S. with “high-level security guarantees.”
According to sources, the current deal imposed a $1 billion fine on ZTE, as well as $400 million in escrow in the event that the company should violate any agreements down the road. Additionally, the Commerce Department plans to amend its 2017 settlement agreement and count the $361 million ZTE has already paid.
ZTE also allegedly promised to replace its board and executive team within 30 days, and grant "unfettered" site visits to prove that all U.S. components are being used as claimed by the company, sources said.
Not all government officials may be on-board with the plan to save ZTE. U.S. Sen. Marco Rubio, a Republican, in May remarked that Congress could put a bill forward to prohibit ZTE, as well as other Chinese telecom companies, from operating in the U.S. Further, the Federal Communications Commission (FCC) in April proposed a rule that would ban local communities from using the FCC’s $8.5 billion Universal Service Fund to purchase telecommunications equipment that poses a national security risk to the United States, specially calling out Chinese firms Huawei and ZTE.
Prior to ceasing its main operations, ZTE took in about 50 percent of its $15 billion in annual revenue via the channel, according to research firm Gartner.