Huawei Technologies Co., China's biggest phone-network equipment maker, is considering selling a majority stake of a handset unit that may be worth at least $4 billion, two people familiar with the plan said.

The closely held Chinese company sent out invitations in the past month to private-equity firms including Bain Capital LLC, Blackstone Group LP, TPG Inc., Kohlberg Kravis Roberts & Co., Warburg Pincus LLC and Carlyle Group, the people said, asking not to be identified because the matter is confidential. Bidders have until June 23 to submit a non-binding offer, they said.

A sale would raise funds for Huawei to invest in its main operations of making routers and other network gear for wireless operators such as China Mobile Ltd. and Vodafone Group Plc. Investors in the Shenzhen, South China-based company's unit would get access to a business that researcher BDA China Ltd. estimates doubled revenue to $2.6 billion last year.

``Huawei makes cheap phones for emerging markets, with low- cost manufacturing in China behind that, which could make the unit attractive for investors,'' said Duncan Clark, managing director of Beijing-based BDA.

Huawei plans to sell at least 49 percent of the handset business, which also makes modems and wireless Internet cards, although the size of the stake would depend on the proposals submitted by the buyout firms, the people said. The company doesn't plan to invite strategic investors to make a bid to avoid competition in the industry, they said.

The Chinese equipment maker is ``exploring opportunities'' for private equity firms to invest in its handset unit, Huawei said in an e-mailed response to a request for comment. Huawei has hired Morgan Stanley as its financial adviser, it said.

Profit Forecast

Richard Barton, Asia chief executive officer of Gavin Anderson & Co., which handles media queries for KKR, declined to comment.

Huawei's handset unit, whose customers include Newbury, England-based Vodafone, may generate $380 million in profit on $3.5 billion of revenue in 2008, the people said, citing the information memorandum sent to potential bidders.

While analysts don't publish reports on Huawei, Frederick Wong at BNP Paribas SA in Hong Kong said investors may refer to contract-manufacturer Foxconn International Holdings Ltd. to assess the unit's valuation.

Hong Kong-listed Foxconn, which makes phones for Nokia Oyj and Motorola Inc., trades at 10.6 times estimated 2008 earnings, according to data compiled by Bloomberg. Based on Foxconn's multiple, Huawei's unit would be valued at $4 billion.

Still, Chinese mobile-phone makers are facing increasing competition from industry leaders Nokia and Samsung Electronics Co., forcing the nation's largest handset maker, Lenovo Group Ltd., to sell its phone unit for $100 million in February after shipments fell 31 percent.

Lower Margins

``Handsets are a lower margin, highly competitive business, not Huawei's strong point,'' BDA's Clark said. ``A lot of companies are realizing that if you're not in the top three or four vendors in handsets that it's not really worth staying the business.''

The mobile business's sales accounted for 16.4 percent of the Huawei's total revenue in 2007, rising from 11.8 percent in 2006, according to BDA, citing data it obtained from Huawei. Huawei doesn't publicly disclose total revenue or profit figures.

Huawei's contract sales rose 45 percent to $16 billion last year, with markets outside China accounting for 72 percent of the total, according to Huawei's Web site.

The company, which was founded by a former Chinese army officer, shipped 18 million mobile phones, with handsets accounting for 46 percent of the handset unit's sales last year, according to BDA estimates.

Abandoned Bid

Huawei and Bain Capital abandoned a $2.2 billion bid for 3Com Corp. in March after some U.S. lawmakers said they objected to the acquisition because it would put 3Com's anti-hacking technology, used by the Pentagon, in Chinese hands.

Selling the stake to a U.S. investor may help Huawei win orders from U.S. mobile-phone operators, the people said.

The Wall Street Journal reported last month that Huawei may sell its handset operations.

Funds from the sale may help Huawei compete against larger network-equipment makers Ericsson AB and Alcatel Lucent, according to ISuppli Corp. analyst Kevin Wang.

``Huawei will need a lot of resources to challenge the likes of Ericsson and Alcatel,'' said Wang, who's based in Shanghai.

Source:Bloomberg