ZTE may have to pay as much as $1.7 billion in fines before it is allowed to resume trading again with the US, according to a new report out of Reuters which credits “people familiar with the matter” for the information. The figure is supposedly not set in stone and could change before a deal is finalized, however. If accurate, then the amount would eclipse the $1.3 billion penalty that had been previously suggested.
Technically, the $1.3 billion figure has not changed and the sources mentioned in this latest report suggest ZTE might realistically end up paying far less – with the figure ultimately closer to the $1 billion mark. However, in addition to that lump sum the Chinese company will be expected to place another $400 million in escrow. According to the report, this figure is directly related to the previous fines imposed on ZTE as in addition to the 2017 $892 million fine leveled at the company, it is also understood an additional $300 million fine was suspended at the time, and only expected to be accountable if additional violations occurred. The current sources suggest that suspended amount may now be resurfaced as part of the current deal and to be held in escrow along with an additional $100 million.
Financial penalties aside, the sources also state President Trump’s administration will look to enact additional non-monetary caveats to the deal including ZTE agreeing to unrestrained access to its sites, as well as online documented declarations of US component costs. Both of these conditions are designed to reassure the US, the components in use are US components. Adding to the reported deal, it’s also expected ZTE will have to agree to replace its board of executives in the very near future. A condition which may already be taking shape considering a company executive was replaced within the last couple of days – and widely assumed to be linked to the same US provisional deal. Coming back to the financial aspect, while as much as $1.7 billion in penalties will be a significant amount for ZTE, it seems it is better in the long-term to agree to the condition as it was recently reported how the telecommunications equipment company has estimated losses in excess of $3 billion due to the US ban.