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ZTE posted positive operating cash flow of RMB 1.87 billion in 2012 thereby recording free cash flow for the first time in three years.
The company was able to do this by exercising effective cost controls and securing new network contracts that offer higher profit margins. The company recorded a net loss attributable to shareholders of listed company of RMB 2.84 billion.
Due to delays in some network contracts and lower sales of feature handsets, the company recorded a decline in revenue in 2012. The company also recognized income from some lower-margin contracts in Africa, South America and China in 2012, which resulted in a drop in gross profit margin.
Annual revenue for the company fell 2.4 perent to RMB 84.2 billion in 2012. In China, revenue of RMB 39.6 billion was stable compared to a year earlier, accounting for 47 percent of the company's total. Overseas revenue dropped 4.5 percent to RMB 44.7 billion, representing 53 percent of the company's total.
Combined revenue for Europe and the Americas increased 1.6 percent from a year earlier, after strong growth in sales in the United States market. In the Asia Pacific market, revenue increased 2.8 percent. In the network infrastructure division, the company shifted towards higher-margin business. In the terminals division, the mix shifted towards smart devices.
In the network infrastructure division, ZTE posted revenue of RMB 41.6 billion. In the terminals division, revenue of RMB 25.84 billion was in line with the company's target. ZTE recorded revenue of RMB 16.8 billion from sales of software, services and other products.
Faced with pressures in operations in 2012, ZTE remained committed to technology innovation, increasing spending on research and development by 4 percent to RMB 8.83 billion. ZTE ranked first in international patent applications by the World Intellectual Property Organization in each of the past two years, and was the first Chinese company to reach the Top-10 in patent applications to the European Patent Office.
In wireless products, ZTE's innovations in FDD-LTE solutions helped the company cement its partnerships with the world's leading operators. In TD-LTE, ZTE consolidated its industry leadership, with deployments in India, the Middle East and Japan.
In the wireline and optical network equipment segment, the company leveraged new technology development to maintain business growth, leveraging the opportunities in the rapid development of broadband and mobile internet internationally. In the terminals division, ZTE continued to record strong growth in sales of smart devices, as the company delivered competitive products, and diversified its distribution channels.
In 2013, the rapid growth in mobile internet is driving investments in the optimization of 3G networks, and the deployment of 4G networks. In wireline, government support for bandwidth expansion in many countries will drive investment in broadband infrastructure.
The dramatic increase in wireless and wireline data traffic offers opportunities for growth in transmission networks. Global market demand for smart devices will continue to grow strongly, as more users access the mobile internet to look for richer content and applications.
The company is strongly committed to technology innovation to deliver the best products and solutions. Our product strategy will remain focused, and we will strive to improve efficiencies in our research and development efforts.