Huawei in talks to sell parts of its Honor smartphone business

Huawei is resetting its priorities due to US sanctions and will focus on its higher-end phones rather than the Honor brand aimed at young people and the budget conscious. (AP)
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Updated 15 October 2020

Huawei in talks to sell parts of its Honor smartphone business

  • Honor brand smartphones accounted for 14.6 million, or 26 percent of the 55.8 million smartphones Huawei shipped in the second quarter of this year

HONG KONG: Huawei Technologies is in talks with Digital China Group and other suitors to sell parts of its Honor smartphone unit in a deal that could fetch up to 25 billion yuan ($3.7 billion), people with knowledge of the matter said.

Embattled Huawei is resetting its priorities due to US sanctions and will focus on its higher-end Huawei phones rather than the Honor brand aimed at young people and the budget conscious, they said. The assets to be sold have yet to be finalized but could include Honor’s brand, research and development capabilities and related supply chain management business, two of the people said.

The deal may be an all-cash sale and could end up smaller, worth somewhere between 15 billion yuan and 25 billion yuan.

Digital China, the main distributor for Honor phones, has emerged as the frontrunner but other possible buyers include Chinese electronics maker TCL and rival smartphone maker Xiaomi, the people said, declining to be identified as the talks were confidential.

Huawei, the world’s biggest telecoms equipment vendor and No.2 smartphone maker, declined to comment as did TCL. Digital China and Xiaomi did not respond to requests for comment.

The Honor brand was established by Huawei in 2013 but the business mostly operates independently from its parent.

Kuo Ming-chi, an analyst at TF International Securities, has said that any sale by Huawei of the Honor smartphone business would be a win-win situation for the Honor brand, its suppliers and China’s electronics industry.

“If Honor is independent from Huawei, its purchase of components will no longer be subject to the US ban on Huawei. This will help Honor’s smartphone business and the suppliers,” he wrote in a research note last week.

The US government last year moved to prevent most US companies from conducting business with Huawei, saying the tech giant was ultimately answerable to the Chinese government. Huawei has repeatedly denied being a national security risk.

In May, Washington announced new rules aimed at constricting Huawei’s ability to procure crucial chips that it designs for 5G networking gear and smartphones.

The Honor brand, which sells its phones online through its own sites and via third-party retailers, competes with Xiaomi, Oppo and Vivo in the market for lower-end phones in China. Its phones are also sold in Southeast Asia and Europe.

Honor brand smartphones accounted for 14.6 million, or 26 percent of the 55.8 million smartphones Huawei shipped in the second quarter of this year, according to estimates from research firm Canalys.

But margins for lower-end phones can be razor thin, and Honor booked less than 5 billion yuan in net profit on revenue of about 70-80 billion yuan last year.


Oman’s bond market return a key test for reform path

Updated 21 October 2020

Oman’s bond market return a key test for reform path

  • After becoming ruler in January, Sultan Haitham made shaking up and modernising state finances a top priority

DUBAI: Oman’s return to the international bond market this week will be a test of its ability to convince investors that long-awaited fiscal reforms have started to put it on a sustainable financial footing.

Oman, rated below investment grade by all the major credit agencies, announced on Monday plans to issue bonds with maturities of three, seven and 12 years, in what would be its first global debt sale this year.

Sultan Haitham, who became Oman’s ruler in January, has made shaking up state finances one of his priorities.

But investors would like to see more concrete steps being taken and, after a further sovereign downgrade last week, may require the new bonds to offer a significant premium over the country’s existing debt.

“The new sultan has done some good things — rationalizing the number of ministries, the implementation of VAT, plans to generate additional tax revenues, and they still have sovereign assets,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.

“There is positive momentum but it will take time for that credibility to build.”

According to a bond prospectus, Oman has begun talks with some Gulf countries for financial support.

“I don’t think this will actually be taken into consideration by investors unless there is a tangible announcement from Gulf countries with a tangible support package,” said Zeina Rizk, executive fixed income director at Arqaam Capital.

Oman will likely price the new three-year bonds in the high 4 percent area, the seven-year tranche in the high 6 percent and the 12-year in the mid-to-high 7 percent area, implying a premium of at least 50 basis points (bps) over its existing curve, she said.

Two other investors, who did not wish to be named, said the paper could carry a 25 bps premium over existing secondary trading levels.

Sources have previously told Reuters Oman would target over $3 billion with the new deal.

“If they take $3 to 3.5 billion, you will have a market indigestion for Oman, and I’m sure people will ask to be compensated for this risk,” Rizk said.