The mainland's top mobile phone maker China Kejian Co plans to acquire one of the largest mobile phone retailers in South China to cut costs amid steeper competition, according to local media reports.

The retailer, Shenzhen-based Hengbo Telecom, which is the general distribution agent of Nokia in South China, has 55 chain stores and exclusive outlets for foreign and domestic mobile phone brands, such as Nokia, Samsung and TCL, in South and Central China.

Hengbo is the core distribution agent for many well-known brands including Kejian, Bird, Konka, Motorola and Samsung.

However, it has run into big debts recently, roughly 100 million yuan (US$12.0 million) according to market speculation, after a financial tie-up with a bankrupt company, said a report in Chinese-language newspaper 21st Century Business Herald.

Both Kejian and Hengbo have not commented on media reports but a senior Kejian official said they intend to change the operational model by directly controlling the sales channel.

Sources from Everbright Bank Shenzhen Branch, which is handling Hengbo's debt, said Kejian is in talks with Hengbo on the acquisition.

After successfully acquiring nearly 50 per cent of the domestic mobile phone market from multinational firms, domestic manufacturers have found profit margins decreasing as costs rise.

Kejian's problems are among the most serious. According to statistics by the Ministry of Information Industry based on the first-quarter results, Kejian was squeezed out of the top 10 brands on the mainland from last year's sixth, and its gross profit margin, at 9.13 per cent, was among the lowest in the industry.

Like some domestic players such as TCL and Panda, which have consolidated their sales networks, Kejian expects the acquisition of Hengbo to cut costs by 20 to 30 per cent, said analysts.

However, analysts doubt that Hengbo, after being acquired by Kejian, could be able to maintain the relationship with current clients - sales of Nokia have contributed a significant part to Hengbo's profit.

Close

Today's Top News		Top Business News
+Deals on US goods cut trade imbalance ( 2003-11-13) +Chinese and Indian navies take to the water together ( 2003-11-13) +UN grants US$95m to help war on AIDS ( 2003-11-13) +3 children die in mass poisonings ( 2003-11-13) +Quake kills child, 25 people hurt ( 2003-11-14)		+Pension fund seeks new investment channels ( 2003-11-14) +Kejian plans acquisition of phone retailer ( 2003-11-14) +Brewer enhances production capacity ( 2003-11-14) +Samsung plugs into China's laptop market ( 2003-11-14) +UTStarcom, Matsushita in 3G biz ( 2003-11-14)