(Yicai Global) Oct. 29 -- ZTE's stock price tumbled after the Chinese telecoms equipment maker said earnings plunged in the third quarter and announced a plan to take full control of its chip-making unit with funds partly raised from the issue of new shares.

Shenzhen-based ZTE [SHE: 000063] fell as much as 5.8 percent to CNY32.52 (USD4.80) this morning, the lowest since Sept. 11. The stock closed 4.1 percent down at CNY33.08.

 

Net profit fell 68 percent to CNY850 million (USD126.3 million) in the three months ended September from a year ago due to higher overheads and carrier network costs, ZTE said after the market closed yesterday. But revenue jumped 37 percent to CNY26.9 billion (USD4 billion) because of its increasingly popular carrier network services, it said.

 

In the same statement, ZTE also said it plans to sell new shares and raise funds to buy the 18.9 percent of chipmaker ZTE Microelectronics Technology that it does not already own for between CNY541 million and CNY2.6 billion (USD80.7 million and USD388 million).

Formed in 2003, ZTE Microelectronics designs and produces baseband processors for smartphones and base station equipment. It made more than CNY7.6 billion in revenue last year. In 2017, the parent company spent a sum equal to more than 10 percent of its chip budget to buy products from the unit.

 

ZTE Microelectronics’ self-developed 7nm chips are used in base stations for fifth-generation wireless networks, ZTE Vice President Li Hui said at a conference earlier.

 

A focus on equipment needed to upgrade to 5G networks may brighten up the company's prospects. The acquisition will help consolidate ZTE's core competitiveness and further enhance its profitability and shareholder return, the firm added.

 

By the end of September, ZTE had won 55 commercial 5G contracts worldwide and had launched 5G cooperation with more than 90 global carriers, covering more than 500 industry partners. 

 

Editor: Zhang Yushuo, Emmi Laine