Huawei Technologies Co (華為) plans to sell budget-brand smartphone unit Honor Terminal Co (榮耀) in a 100 billion yuan (US$15.2 billion) deal to a consortium led by handset distributor Digital China Holdings Ltd (神州數碼) and the government of its home town of Shenzhen, people with knowledge of the matter told reporters.
The plan comes as US restrictions on supplying Huawei force the world’s second-biggest smartphone maker — after South Korea’s Samsung Electronics Co — to focus on high-end handsets and corporate-oriented business, the people said.
It also indicates little expectation for any change in the US perception of Huawei as a security risk following a change in US administration, one of the people said.
The all-cash sale would include almost all assets, including brand, research and development capabilities, and supply chain management, the people said.
Huawei could announce it as early as Sunday, one of the people said.
Main Honor distributor Digital China would become a top-two shareholder of sold-off entity Honor Terminal with a nearly 15 percent stake, two of the people said.
Digital China, which also partners Huawei in businesses such as cloud computing, plans to finance the bulk of the deal with bank loans, the two people said.
It would be joined by at least three investment firms backed by the government of Shenzhen, with each owning 10 to 15 percent, they said.
After the sale, Honor plans to retain most of its management team and 7,000-plus workforce, and go public within three years, the people said, declining to be identified due to confidentiality constraints.
Honor declined to comment. Huawei, Digital China and the Shenzhen government did not immediately respond to requests for comment.
Huawei established Honor in 2013, but the business mostly operates independently.
Divestment would mean Honor is no longer subject to Huawei’s US sanctions, analysts said.
Honor sells smartphones through its own Web sites and third-party retailers in China, where it competes with Xiaomi Corp (小米), Oppo Mobile Telecommunications Corp (歐珀) and Vivo Communication Technology Co (維沃) in the market for lower-priced handsets. It also sells its phones in Southeast Asia and Europe.
Honor-brand smartphones made up 26 percent of the 51.7 million handsets Huawei shipped in the July-to-September period, estimates from researcher Canalys Co showed.
Honor's products also include laptops, tablet computers, smart TVs and electronic accessories.
With margins thin for lower-end mobile phones, Honor booked about 6 billion yuan in net profit on revenue of about 90 billion yuan last year, one of the people said, citing audited figures.
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