ZTE reportedly weighs US$5.6b handset carve-out with Shanghai state-owned partner

ZTE is reportedly negotiating a restructuring that would move its mainstream consumer smartphone operations into a new joint venture with a Chinese internet company and a Shanghai state-owned enterprise, ChannelNews reported on 4 November 2026. The transaction is valued at US$5.6 billion, which ChannelNews put at approximately A$8 billion. ZTE makes a significant proportion of the handsets sold under the Telstra and Optus brands.

The internet company, which is not named, is reportedly prepared to contribute US$1.1 billion. Talks continue over the final valuation, ownership structure and control of the new business. Sources familiar with the negotiations told ChannelNews that they began earlier this year and that the parties reached broad agreement on a restructuring model in September. An announcement had been targeted for later in November, though the deal structure and shareholder arrangements remain unresolved.

Under the proposal, routers, mobile broadband equipment and home terminal devices would stay with the ZTE parent company, and the RedMagic gaming phone business would sit outside the deal. The new venture would focus on mainstream handsets, including international operations that supply carriers such as Telstra and Optus. A subsidiary named Shanghai Shenqi Jiyuan Intelligent Terminal Company has reportedly been set up, with smartphone staff said to have been transferred into it.

If completed, the split could leave the two carriers dealing with separate corporate entities: the joint venture for house-brand phones and the ZTE parent for modems, routers and home broadband gear. ChannelNews said that raises questions over supply agreements, software support, certification, security responsibilities and accountability. It also pointed to possible complexity around software updates, firmware maintenance and security patches.

ChannelNews said earlier this year that ZTE's Australian website listed 11 ZTE-made handsets sold under the Telstra brand and 11 under Optus, along with hotspots, hubs and modems. It noted that many of the devices are marketed mainly under the carrier brand rather than ZTE's.

The report recalled that in 2018 a US denial order over ZTE's breach of an earlier sanctions settlement led Telstra to suspend sales of 22 ZTE-manufactured products. Sales resumed after the US restrictions were lifted. Nikkei later reported that ZTE had considered selling its smartphone operations, and Huawei and Oppo denied involvement in acquisition talks.

ChannelNews compared the plan with the 2020 sale of Honor by Huawei to a consortium backed by a Shenzhen government-linked entity. It said the level of state ownership, voting rights and operational control in the ZTE deal has yet to be established, and that a state-owned shareholder does not automatically mean direct government control of product development or customer data. It added that Australia's exclusion of high-risk vendors from 5G networks is not a ban on Chinese-made consumer smartphones.