ZTE Spins Off Mobile Division

by Matt Klassen on January 7, 2014

ZTE wants a piece of America’s mobile industry, of that there is no question. The American government thinks ZTE is a spy for the Chinese communist regime, of that there is no doubt. It’s quite a conundrum for the Chinese telecom giant, one that could potentially be solved by spinning off its entire mobile division, as ZTE announced late last week that it will be creating an entirely new company from its mobile devices unit.

In fact, while the company said nothing officially about the accusations of spying levied against the firm over the last few years, I doubt anyone would be surprised if such a decision was made in part to assuage fears that ZTE is a communist front. But such is not the case for ZTE, who has done little to limit the connection of the new subsidiary with its parent company, naming the new entity ZTE Mobile Devices and appointing executive vice president Zeng Xuezhong, formerly the head of the company’s Chinese operations, as the head of the new firm.

The move comes as the company has employed a radical corporate restructuring, one that will see the Chinese vendor focus on three core areas: operators, enterprise, and mobile devices, with hopes that these new moves will streamline the company in an incredibly competitive mobile and telecommunications markets.

Although ZTE has garnered significantly less attention, and taken a significantly softer stance, than its co-accused Huawei regarding the security announcement by the U.S. House Intelligence Committee in 2012 that labelled both companies as spies, the company has struggled just the same to gain any traction in American and European markets, as a accusation of espionage is a black mark that’s hard to remove.

But the Chinese telecom vendor is not giving up, and by spinning off its mobile devices unit into its own company is a sign that the company is confident that a refocus and rebranding is all the company needs to become a viable player in the mobile industry outside of Asia.

According to Telecom Asia, ZTE president Shi Lirong said the restructuring is aimed at keeping the company agile in an intensely competitive industry.

“It is important for the company to become faster, more entrepreneurial, more youthful and more focused,” he said. “We need to execute changes in our strategy, our organization and our culture in a responsive and timely way.”

But as I mentioned, although ZTE has done little to defend itself or rebuff the American decision to brand the company a national security threat, the company seems to be taking a stance in its own way, unwilling to disconnect the newly formed mobile entity from the company itself, a disconnect that might have given the mobile firm a chance in the American and European markets. But while confidence in one’s brand is an admirable quality, sometimes a rename is all one would need to shake such serious allegations, leading me to wonder if ZTE has missed an opportunity here.

In the end one thing is clear, although the move to create the new ZTE Mobile Devices firm was one taken to create a focused and competitive mobile entity, ZTE is not ashamed of its name, no matter the mud its been dragged through lately.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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