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AsianFin -- Chinese communications equipment maker Hytera Communications Corp. has agreed to sell its Spanish subsidiary Teltronic S.A.U. for €75.5 million ($87 million), signaling a major retreat from its once expansive global ambitions as it battles mounting legal and financial pressures.
The buyer, Next Gen Critical Comms S.L., is backed by Spanish private equity firm Nazca Capital, Hytera said in a filing to the Shenzhen Stock Exchange. The transaction, which values Teltronic at 7.1 times projected 2024 EBITDA, will help Hytera shore up cash, reduce debt and recalibrate its strategic focus amid escalating litigation costs tied to a long-running patent battle with Motorola Solutions Inc.
The sale comes after a turbulent year for Hytera, which reported a net loss of RMB 3.49 billion ($479 million) in 2024 due to court-ordered provisions related to U.S. lawsuits. The loss wiped out the company’s retained earnings and pushed its debt-to-asset ratio to 77%—its highest on record. A much-hyped “mega order” from the Middle East also failed to materialize, exacerbating investor concerns about the company’s international strategy.
Hytera acquired Teltronic in 2017 as part of its €88 million purchase of UK-based Sepura Group, aiming to challenge Motorola’s dominance in high-end digital radio systems used by police, transport and emergency services across Europe and North America. The acquisition marked the peak of Hytera’s globalization push and temporarily positioned it as the second-largest TETRA solutions provider in Europe.
That strategy has since unraveled. In 2022, Hytera offloaded Sepura to UK private equity firm Epiris LLP for €159.5 million. But the sale excluded Teltronic, which remained under Hytera’s control—until now.
Teltronic, founded in 1976 and based in Zaragoza, generated RMB 619 million ($85 million) in revenue last year and RMB 28.1 million in net income. Hytera estimates the latest deal will yield a pre-tax gain of around RMB 80 million. Once completed, Teltronic will be deconsolidated from Hytera’s books, which the company says will have an impact on group revenue and earnings.
Hytera has been embroiled in a protracted legal fight with Motorola since 2017, when the U.S. firm sued it for allegedly hiring ex-Motorola engineers and misappropriating trade secrets. The conflict has spanned multiple jurisdictions and came to a head in April 2024, when a U.S. court banned Hytera from selling certain digital radio products globally and imposed a $1 million-per-day fine for non-compliance.
Hytera has since set aside RMB 3.76 billion to cover estimated liabilities, a move that cratered its balance sheet. Its undistributed profits swung from RMB 926 million in 2023 to a deficit of RMB 2.56 billion by the end of 2024. The company acknowledged that enforcement of the full compensation could pose a serious risk to its liquidity and going-concern status.
Adding to its troubles, a speculative rally in Hytera shares last year—fueled by unverified reports of a major walkie-talkie order from the Middle East—quickly lost steam. The stock surged more than 200% over 22 sessions before collapsing as the rumored order failed to materialize in earnings filings.
Hytera’s international revenue has steadily declined, from 61% of total sales in 2017 to under 47% last year. The company cited litigation uncertainty and customer compliance concerns for the slowdown in overseas markets.
In its latest guidance, Hytera projected a first-half 2025 net profit of just RMB 80 million to 100 million, down as much as 50% from a year earlier, citing overseas project delays and weakness in its EMS segment. As of March 31, the company’s leverage ratio had surged to 77.5%.
Hytera, often called the “Huawei of private networks,” now faces a reckoning after years of aggressive overseas expansion. With its core international assets sold and legal liabilities mounting, the company is under pressure to stabilize its balance sheet and refocus on core domestic opportunities—if it can survive the fallout.
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