(Yicai Global) Feb. 1 -- China's large communication equipment producer ZTE Corporation plans to raise up to CNY13 billion (USD2.06 billion) through issuing no more than 687 million shares to a maximum of 10 recipients, it said. The company will use funds for the development of mobile 5G technology applications. The move comes only one day after China set 2018 as crucial year for 5G development.

ZTE will spend nearly CNY9.1 billion to be raised to inject impetus into its "project on technology research and product development of 5G network evolution," while another CNY3.9 billion will be used to "replenish working capital," it said in a statement yesterday.

The 5G R&D project requires a total investment of CNY42.8 billion, of which CNY9.1 billion will be financed from the proceeds, the statement added. With an implementation period of three years, the project involves research and related product development on technologies of cellular mobile communication network, core and transmission networks and fixed-line broadband, as well as Big Data and network intelligence.

The implementation of the project is an important move for the company to accomplish its "5G Pioneer" strategy, will facilitate centralizing its resources for R&D, strengthen its position in the field of 5G technology, and improve product competitiveness and global market position, ZTE said.

Furthermore, the private placement of A shares is expected to reduce the company's debt-asset ratio, helping optimize the capital structure, enhancing the scale of assets, and providing a strong guarantee for the company to give full play to its main business advantages, it explained.

The pricing benchmark date of ZTE's private placement of A shares will be the first day of the issuance period, and the issuing price will be no less than 90 percent of the average price of the company's A-shares during the 20 trading days prior to the issuance date. The final issuing price will be determined by the board of directors of the company or its authorized representative in consultation with the sponsor (underwriter) based on the result of the bidding after the approval from China Securities Regulatory Commission has been obtained.

As of yesterday, the controlling shareholder of ZTE Corporation is ZTE Holdings Co. with a 30.34 percent stake. Upon completion of the share issuance, ZTE Holdings will hold 26.07 percent shares of ZTE if 687 million shares are issued, still remaining the controlling shareholder of the company.