Alcatel subcontracts the making of its cell phones, so no manufacturing facilities or production staff were included in the deal. The combination opens the way to Alcatels eventual withdrawal from the handset business, which would rid it of a loss making activity, while for TCL the transaction is another step on the way in its ambition to become a global technology player.
We think this is positive for both companies as Alcatel has been struggling to break even as handset volumes have been weak due to (its) uncompetitive portfolio, Nomura analyst Richard Windsor said in a research note. TCL meanwhile gets access to GSM standard wireless technology, the dominant current standard for mobile phones around the world, without having to sacrifice margins by buying it, Mr Windsor said, adding that the venture should be better positioned to break even thanks to higher volumes to cover fixed costs.
The deal is similar to one completed earlier this year in which another branch of TCL and Frances Thomson pooled their TV-making assets. Under the deal TCL was set to take full ownership of the new business about 18 months later.