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TCL Corp. (000100.SZ), a major Chinese consumer electronics maker, was upbeat about its mobile phone business and aimed to sell more phones this year and next that will help lead one of its new joint ventures to profit, an executive said.
In August, TCL Corp. formed a mobile phone joint venture with France’s Alcatel SA (ALA) through its arm TCL Communications Technology Holdings Ltd. (2618.HK), which began trading Monday in Hong Kong.
“Overall, we’re confident the new JV will make a profit in 2005,” Yuan Xincheng, TCL Corp. Senior Executive Vice President said.
With the help of the new joint venture, an EUR100 million deal in which TCL Communication holds a 55 percent stake and Alcatel a 45 percent stake, TCL expects to regain market share lost to foreign handset makers in China and boost its presence abroad, Yuan said.
As reported earlier, Li Dongsheng, chairman of both TCL Corp. and TCL Communication, said this month he expects TCL and Alcatel to sell a combined 20 million handsets in 2004.
Yuan said TCL expects to sell 25 million mobile handsets in 2005, of which 10 million would be under the Alcatel brand.
TCL has a target to sell 10 percent more of its own handsets this year than in 2003 due to the introduction of new models and expected strong fourth quarter sales, Yuan said from the company’s headquarters in Guangdong Province.
TCL sold 9.8 million handsets in 2003, its annual report shows.
The outlook comes as Shenzhen-listed TCL Corp. reported its fourth straight month of on-year declines in mobile handset sales in August, when sales fell 39 percent to 453,277 units.
Yuan attributed the recent sales slump to foreign makers offering handsets at a wider variety of prices and China’s tightening measures.
The market share in China of domestic manufacturers has fallen to 38% this year from 58 percent in 2003, due to gains by multinationals like Motorola Inc. (MOT) and Nokia Corp. (NOK), Yuan said.
TCL aims to capture about 12 percent of China’s handset market in 2005, up from 8 percent in the first half of this year and 11 percent in 2003, Yuan said.
China is the world’s biggest mobile phone market, as measured by users, with 310 million subscribers at the end of July.
Analysts have been skeptical about whether TCL can quickly turn around loss-making operations that it bought from Alcatel under the new joint venture.
Alcatel’s mobile phone business recorded a net loss of 34.8 million euros in the first half of 2004, and a net loss of 74.4 million euros for the full year 2003.
The Alcatel-TCL joint venture will primarily sell Alcatel brand phones in North America and Europe, and TCL brand phones in China and Asia, Yuan said. Some Alcatel brand phones will also be sold in China, but the two labels are unlikely to compete, he said.
TCL is also considering more tie-ups. Other than Alcatel, TCL’s Hong Kong-listed unit TCL International Holdings Ltd. (1070.HK) formed a television joint venture with France’s Thomson SA (TMS) last year.
“Many big companies have approached us (to form a joint venture), but we haven’t come to any concrete plans,” Yuan said, but he added a possible electrical products joint venture could be set up in the first half of 2005.
TCL would also consider forming a lighting products JV with Royal Philips Electronics NV (PHG), he said.
An arm of Philips holds a 2.5 percent stake in TCL, according to TCL’s half-year financial statement.
(Shenzhen Daily September 29, 2004)
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