TCL Communication opts to expand cautiously

PUBLISHED : Friday, 01 September, 2006, 12:00am
UPDATED : Friday, 01 September, 2006, 12:00am

Mainland handset manufacturer will continue to focus on the low-end market

TCL Communication Technology Holdings, a mainland mobile handset manufacturer, expects its business to break even this year as it adopts a cautious expansion approach after suffering a HK$1.6 billion loss last year.

The company, a unit of Shenzhen-listed TCL Corp, said second-quarter profit was HK$6 million, compared with a HK$77 million loss in the first quarter.

TCL Communication cut its sales forecast to 13 million units this year from 14 million it made a quarter ago as it wants to avoid price competition with international brands such as Nokia and Motorola in the overseas markets.

'I feel very comfortable in maintaining a low market share at present rather than expanding at a big loss like Siemens and BenQ or taking a heavy financial burden in Europe like [Ningbo] Bird and Sagem,' said Liu Fei, chief executive of TCL Communication.

The firm will continue to focus on the low-end market where Siemens and BenQ are major rivals, and will launch a new range of MP3 handsets to boost profitability.

TCL Communication makes phones for foreign telecommunications carriers such as Vodafone, Orange and T-Mobile. The company also sells its handsets under the Alcatel brand it bought in October 2004 in Europe and North America.

The company's second-quarter sales fell 3 per cent to HK$1.24 billion, mainly because of a slump in the China market where first-half sales plunged to 601,000 units from 1.69 million units a year ago.

However, a 55 per cent increase in overseas sales boosted total unit sales by 13 per cent to 5.44 million. Gross profit margin improved to 11.3 per cent from 2.1 per cent last year when it carried out restructuring for the Alcatel unit.

Its China market recorded a HK$20 million loss in the second quarter but was more than offset by the HK$26 million profit in the overseas market.

'We cut our China sales to about 18 per cent of total because of adverse market conditions; we expect it will bounce back to 33 per cent in the coming two years,' said senior vice-president George Guo.

Its shares fell 6.89 per cent yesterday to close at 27 HK cents.