Alcatel To Move Cellphones To Chinese JV

Paris | Updated: Apr 27 2004, 05:30am hrs
French communications equipment maker Alcatel said on Monday it is to create a joint venture with Chinas TCL Communications to make and sell mobile phone handsets, setting up a likely exit from the money-losing part of its business. TCL is to contribute 55 million euros ($65.36 million) to the venture and will take an initial 55 per cent, leaving Alcatel with 45 per cent after contributing 45 million euros and its existing mobile handset business, including about 600 staff.

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.