TCL to sell 49 percent stake of cellphone division in restructuring move

TCL Corp plans to sell a 49 percent stake in its subsidiary TCL Communication Technology for HK$490 million ($62.8 million) as the Chinese electronics maker aims to restructure its stagnant smartphone business.

The company will sell an 18 percent stake to Unisplendour Technology Venture Capital Ltd, 18 percent to Oriente Grande Investment Fund LP and 13 percent to Vivid Victory Developments Ltd, according to an announcement issued by TCL on Monday night.

The move is to introduce outside investors who possess industrial background and business resources to optimize the ownership structure of TCL Communication and accelerate its transformation, according to the company.

TCL said although the company is actively promoting strategic adjustment and business restructuring, its handsets sales in overseas markets continue to be sluggish and the overall performance of TCL Communication is poor.

Unisplendour has abundant resources in the fields of smartphone chip, storage and other core components, while Oriente Grande Investment Fund has made a series of investments in semiconductor wafers.

TCL reported its business income reached 52.2 billion yuan ($7.9 billion) in the first half, up 7.93 percent, while its net profit rose more than 70 percent. The growth mainly comes from CSOT Corp, a major TCL subsidiary that produces liquid crystal display panels.

Its multimedia and home appliance businesses also contributed to the growth, but TCL Communication witnessed a decline in its revenue in the first six months this year.

The sales of communication equipment and other products came up to 21.16 million units, down 36.2 percent year-on-year, with its sales revenue reaching 6.87 billion yuan, a decrease of 26.1 percent compared with the same period last year.

"TCL's smartphones mainly target at the low-end market. Due to mounted competition from domestic rivals, its market share is relatively small at home and abroad," said Roger Sheng, research director at consultancy Gartner Inc.

The sluggish sales of its handsets dragged down TCL's overall performance. Unisplendour, which has a layout in the chip sector, hopes to expand vertical business by acquiring stakes from TCL Communication, Sheng added.