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TEHRAN, June 13 -Investors wiped about $3 billion off embattled Chinese telecommunications giant ZTE Corp’s (0763.HK) (000063.SZ) market value as it resumed trade on Wednesday after agreeing to pay up to $1.4 billion in penalties to the U.S. government.
FILE PHOTO: A ZTE smart phone is pictured in this il
TEHRAN, Young Journalists Club (YJC) -Investors wiped about $3 billion off embattled Chinese telecommunications giant ZTE Corp’s (0763.HK) (000063.SZ) market value as it resumed trade on Wednesday after agreeing to pay up to $1.4 billion in penalties to the U.S. government.
China’s No. 2 telecommunications equipment maker was crippled when the United States imposed a seven-year supplier ban on the company in April after it broke an agreement to discipline executives who conspired to evade U.S. sanctions on Iran and North Korea.
The ban, which has prevented ZTE from buying the U.S. components it relies on to make smartphones and other devices, will not be lifted until ZTE pays a fine and places $400 million more in an escrow account in a U.S.-approved bank. It was also ordered to radically overhaul its management.
“While the nightmare is now over, ZTE will likely have to deal with many changes,” Jeffries said in a research report, adding that it expects significant near-term selling pressure on the company’s shares.
Confirming details of the U.S. deal, ZTE said late on Tuesday it would replace its board of directors and that of its import-export subsidiary ZTE Kangxun within 30 days of the June 8 order being signed by the United States.
All members of its leadership at or above the senior vice president level would be removed within the 30-day period, with a commitment that they would not be re-hired, along with any executives or officers tied to the wrongdoing, it said.
The U.S. commerce department can exercise discretion in granting exceptions.
According to a Reuters estimate based on company filings and a source with knowledge of the matter, that could result in about 40 senior executives being replaced including its 14-person board, based on its current management structure.
ZTE has more than a dozen senior vice presidents, which is a level below executive vice president, said the company source who declined to be identified as they were not authorized to speak to the media.
As part of the U.S. order, the Commerce Department also will select a monitor, known as a special compliance coordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years. The coordinator will have a staff of at least six employees funded by ZTE.
Source:Reuters
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