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TCL Corp announced Tuesday that it will list its mobile phone business via introduction instead of plans for an initial public offering exposing it to unfavorable market conditions.
An introduction listing means the company will not offer new shares to the public.
According to a statement Tuesday, TCL Corp recently finished a reorganization of its mobile phone business-related stock.
The Shenzhen-listed TCL Corp now holds 36 percent of the mobile units, while TCL International Holdings Ltd, the Hong Kong-listed arm of TCL Corp owns 40.8 percent of the mobile unit.
The remainder is held by two Hong Kong venture capital funds and senior managers of the unit.
TCL International will dispatch 40.8 percent of its stock to its shareholders via non-cash dividends, TCL International said Tuesday.
But the plan needs to be further discussed at the shareholders' conference, the statement said.
TCL Communication Technology Holdings Ltd (TCL Communication), which owns all the assets of Huizhou TCL Mobile Communications Co (TCL Mobile), will incorporate all mobile phone business units.
The plan still needs the approval of the China Securities Regulatory Commission and the Hong Kong Stock Exchange.
TCL's announcement came amid a bumpy performance on China's stock market which has held back investor enthusiasm.
TCL International owns all the TV-making assets of its state-owned parent, TCL Group.
But TCL International has said it wants to dispose of TCL Mobile through a share distribution, as it focuses on its recently formed TV joint venture with France's Thomson.
"The split-off of its mobile phone business won't have much impact on its domestic listed parent company," Dai Chunrong, an analyst from China Securities.
"As there is no new share offering via introduction, the company's overall performance will be diluted," she said.
In the long run, the split-off and listing plan will help the company become much more focused on its mobile business and create a new way for it to raise more funds from the international market, she said.
But being exposed to more intense competition in the domestic mobile phone business, TCL Communication should work hard on key technologies which is the Achilles heel for domestic handset players.
To enhance its competitiveness, TCL Corp is working hard to seek cooperation.
According to TCL Corp, a joint venture between TCL Communication and Alcatel is likely to be launched in the third quarter of the year.
As the joint venture just got approval from the European Commission last month, it will be established in Hong Kong and put into operation soon.
The two sides announced the signing of a subscription agreement in June in connection with the establishment of a joint venture company engaged in research and development, subcontracting of manufacturing, sales and the distribution of mobile handsets and peripheral devices.
The signing of the subscription agreement brings TCL Mobile and Alcatel closer to the creation of the joint venture company.
TCL Communication will contribute 55 million euros (US$65 million) in cash for an equity stake of 55 percent in the joint venture and Alcatel will contribute cash and its mobile handset business to the value of 45 million euros (US$53.5 million) for the remaining 45 percent stake.
The formation of the new venture is expected to be completed in July or August, subject to approval of TCL Corporation's shareholders, receipt of all required governmental approvals and the execution of various shareholder and operational agreements.
"This is an exciting partnership which will provide us with a platform to rapidly grow our international business," said Wan Mingjian, chief executive officer of TCL Mobile.
"Joining hands with international big names will be an effective way for domestic handset makers to enhance their competitive edge and seek overseas expansion," said Zeng Jianqiu, a professor from Beijing University of Post and Telecommunications.
"Facing fiercer competition, such cooperation will be a very promising way of becoming stronger both in the domestic and overseas markets," he added.
(China Daily August 4, 2004)
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