Nanjing Panda Weighs Alcatel Mobile Phone Division
Purchase
Nanjing Panda Electronics, a major maker of mobile handsets
in China, is weighing the purchase of Alcatel's mobile
phone division. Although Nanjing Panda said that the talks
were stalled on Monday, talks are continuing, and many
believe that the deal is in its final stage of negotiations.
It is believed that the deal is worth 2.5 billion yuan
(US$300 million).
There are two possible scenarios for the deal. Alcatel
will either get 20 percent of Nanjing Panda, or the two
companies will establish a joint venture (JV) company.
Alcatel,
which is one of France's leading electonics and networking
equipment companies, has been suffering from falling sales
in its mobile phone business. Its mobile handsets make
up three percent of global market share, and command seven
percent of the market in the key east China market. In
2002, its mobile phone division lost 97.8 million yuan,
which was a major improvement on its 2001 loss of one
billion yuan.
Nanjing Panda has been especially aggressive in expanding
its market share in China. In 2003, it spent 110 million
yuan (US$13.3 million) to secure product placement for
its mobile phones on China Central Television's (CCTV)
leading golden hour television programs. The move caught
the company's competitors largely by surprise, and pushed
it into the five leading brands in China.
Beginning in 2003, the Chinese handset market has moved
into its mature market/ low profit stage, and the purchase
of foreign brands is now seen as a quick way to expand
market share. The purchase of French electronics companies
by Chinese companies seems to be particularly popular,
with TCL's
purchase of Thomson last year setting the precedent.
The development of the mobile phone market in Europe,
with government encouragement of infrastructure development,
is seen as more closely mirroring the Chinese mobile phone
market's development than the US model, where takeup of
new products and services has been hampered by domination
of a few major players with incompatible standards.
The Chinese government has encouraged the overseas investment
by leading Chinese domestic players so that Chinese brands
can establish a foreign beachhead, and to relieve over-investment
pressure in the domestic market.
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