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April 26, 2004

Alcatel hands control of handset business to China’s TCL

Alcatel SA is to cede control of its struggling mobile handset business to China's Huizhou TCL Mobile Communication Co Ltd as part of a deal intended to create a challenger to the established industry giants.

By CBR Staff Writer

The French networking equipment company will sink 45m euros ($53.5m) of handset resources and partner relationships into the joint venture, including 600 R&D and other staff. This will give it a 45% stake in the as yet unnamed company with TCL Mobile taking the lion’s share, worth 55m euros ($65.2m).

In return, TCL Mobile brings considerable low-cost production capacity and a strong presence in the world’s fastest growing handset market.

TCL Mobile will control the destiny of the new venture. The company has the option to swap Alcatel’s interest into share in its parent TCL Communications after five years. Alcatel can initiate a similar transfer after the same time.

The joint venture will gain sole use of the Alcatel brand for future handsets. The name is likely to be used in the European and Latin American markets while TCL’s own brand continues in China.

With an ultimate takeover by TCL probable, the move appears to mark a last-ditch effort by Alcatel to succeed in the fickle handset market. However, its chances of creating a real challenger to industry giants such as Nokia, Samsung and Motorola appear limited, at least in the short term.

Alcatel saw its European handset market share halved to 3.4% in 2003, according to Strategy Analytics. Global market share was 1.5% compared with 1.9% for TCL Mobile. Alcatel chose to outsource its manufacturing to Flextronics in 2001.

This article is based on material originally published by ComputerWire

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