A joint venture between TCL Communication Technology Holdings Ltd (TCL Communication) and Alcatel is set to be launched in the third quarter of this year.

The plan got a shot in the arm on Monday when Alcatel won European Commission approval to establish a joint venture with TCL, the intended holding company of Huizhou TCL Mobile Communication Co Ltd (TCL Mobile).

Getting such a green light means the joint venture will soon be up and running in Hong Kong, according to analysts.

The two sides signed a subscription agreement last month in connection with the establishment of a joint venture company engaged in research and development, subcontracting of manufacturing, and the sales and distribution of mobile handsets and peripheral devices.

The signing of the agreement brings TCL Mobile and Alcatel closer to setting up the joint venture.

TCL Communication will invest 55 million euro (US$65 million) for a 55 percent equity stake in the joint venture, with Alcatel contributing cash and a mobile handset business worth 45 million euro (US$53.5 million) for the remaining 45 percent stake.

The formation of the new venture is expected to be completed in July or August, subject to the approval of TCL shareholders, the receipt of all required governmental approval as well as the execution of various shareholder and operational agreements.

TCL Mobile Chief Executive Officer Wan Mingjian said: "This is an exciting partnership which will provide us with a platform to rapidly grow our international business."

"Furthermore, the joint venture company and TCL Mobile will be able to create significant synergies to deliver a profitable business going forward," he said.

"We have complementary handset sales and distribution markets with little or no overlap," he said.

The joint venture and TCL Mobile combined are expected to have an extensive sales network offering coverage in China, Latin America, Europe and the rest of the world addressing major operators and distributors.

It is further envisaged that the joint venture will benefit from the ownership of all Alcatel mobile handset patents and from the licenses of other patents - together allowing the joint venture to compete effectively in the international market, Wan said.

Also, Alcatel intends to grant to the joint venture company a licence to use the Alcatel brand name for handsets sales and distribution, building on the brand's strength in the telecommunications industry globally.

In addition, the joint venture company can gain access to low-cost engineering professionals in China, while TCL Mobile can gain access to GSM handset technical know-how. The testing and validation methods contributed by Alcatel to the joint venture company are expected to enhance quality control and, in turn, increase product competitiveness.

"To team up with international big names will be an effective way for domestic handset makers to enhance their competitive edge and seek overseas expansion," said Zeng Jianqiu, a professor at Beijing University of Post and Telecommunications.

"Facing fiercer competition, such cooperation will become a very promising way to become stronger both in the domestic and overseas markets," he added.

He pointed out that competitions as well as cooperation should be the trend for the development of domestic handset manufacturing industry.

(China Daily July 21, 2004)