Telstra halts sales of ZTE-made handsets

ZTE halts operations

Telstra has announced it has ceased selling mobile phones and mobile broadband devices manufactured by Chinese company ZTE.

The telco currently sells 19 phones and three mobile broadband modems that are Telstra branded but manufactured by ZTE.

Telstra’s Michele Garra — the company’s head of innovation, product innovation and strategy in the telco’s consumer business — said the decision was a product of a new prohibition on US companies selling device components and software to ZTE that has led to the company halting operations.

ZTE has announced that “major operating activities of the Company have ceased” in the wake of the US ban.

“As of now, the Company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations,” ZTE said in a market announcement.

“The Company and related parties are actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of the matters.”

The US Department of Commerce’s Bureau of Industry and Security (BIS) in April imposed the denial of export privileges against ZTE.

The department said that in March 2017 the company agreed to pay a $1.19 billion penalty for breaching sanctions on Iran and North Korea. ZTE also agreed to a seven-year suspended denial of export privileges.

“The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken,” a statement from the department said.

“ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred. “

The ban on US companies selling device components and software to the Chinese firm took place as Washington and Beijing gear up for a potential trade war.

ZTE has argued that the US order is unfair and ignores the company’s compliance efforts. The company said it identified and self-reported the issues and took corrective measures.

“The Denial Order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of U.S. companies,” ZTE said in a statement released shortly after the US announcement.

“In any case, ZTE will not give up its efforts to resolve the issue through communication, and we are also determined, if necessary, to take judicial measures to protect the legal rights and interests of our Company, our employees and our shareholders, and to fulfill obligations and take responsibilities to our global customers, end-users, partners and suppliers.”

Telstra’s Garra said the decision to stop selling ZTE-made devices was “difficult but necessary”.

“We are working with our device partners to source alternative models as quickly as possible to help meet the needs of customers,” she wrote in a blog entry.

“We want to make sure any device we offer customers is available through all of our stores.”

“We are hopeful that ZTE will be able to reach a resolution to this matter soon so that we can recommence selling Telstra-branded ZTE devices,” the Telstra executive wrote.

The ZTE-made, Telstra-branded devices affected by the announcement are:

Phones: Telstra Flip 2; Telstra Tough 4; Telstra Tough 5; Telstra Tough Max 2; Telstra 4GX Enhanced; Telstra 4GX Premium; Telstra Flip 2; Telstra Lite; Telstra Lite Smart; Telstra 4GX Smart; Telstra Smart Plus; Telstra 4GX Plus; Telstra 4GX HD; Telstra Easycall 4; Telstra Slim Plus; Telstra Buzz 4GX; Telstra T96; Telstra Tempo; Telstra Cruise.

Mobile broadband devices: Telstra 4GX Wi-Fi; Telstra 4GX Wi-Fi Plus; Telstra Pre-Paid 4GX Wi-Fi.