Tags:AT&T | 3Com | Motorola | 3G

Vodafone and AT&T have been named as possible buyers for a 50% stake in Huawei Technologies'' handset division, which was put up for sale last week. The sale is expected to raise upwards of US$2 billion for the company - while also making it easier for the firm to overcome US concerns about security issues with the Chinese owners.

Sources told the South China Morning Post that phone companies such as AT&T and Vodafone had expressed an interest - along with private equity firms, Blackstone, TPG and Kohlberg Kravis Roberts.

Observers however said that a sale to a phone company could put Huawei in an uncomfortable position when trying to secure handset sales to rival operators. Huawei could replace concerns from US politicians with concerns from mobile operator CEOs. The company was recently thwarted in its attempt to take a minority stake in US based 3Com following a backlash from US politicians over company founder and president Ren Zhengfei''s military background.

Bids are expected to be tabled next week.

Huawei plans to sell off its mobile phone, laptop, wireless data-card and home router businesses - retaining its network infrastructure division. The divestment of the handset division into a separate company could well fuel speculation about industry consolidation - particularly as Motorola''s handset division is being spun off into a separate company at the moment.

The company doesn''t publicly release breakdowns of the revenues or profits of different divisions, but handset division up for sale is reported to be profitable and that the sale isn''t meant as an exit from the business. The company was recently reports as aiming to increase its handset production to 50 million units per year. Huawei currently outsources its handset manufacturing to Thailand based Cal-Comp Electronics and Singapore headquartered Flextronics.

Huawei has existing agreements to provide operator branded mobile phones to Vodafone and Telia - as well as USB 3G modems for several operators, including Hutchison 3G.



Source: South China Morning Post