Alcatel studies partnership, sale of mobile phone unit

French communications equipment manufacturer Alcatel is studying ways to end losses in its mobile phone unit that could include the complete sale of the business.

“We are reviewing all kinds of solutions,” Alcatel spokeswoman Régine Coqueran said Tuesday. “These could include a sell-off, a partnership or whatever it takes to end losses.”

While Alcatel has set no hard deadline for making a decision on the future of its underperforming mobile phone unit, the company aims to have a solution by the end of the year at the very latest, according to the spokeswoman.

“All the big players have indicated that to achieve scale, they need around 10% of the market,” said Ben Wood, senior analyst with Gartner. “Alcatel has less than 2%, according to our figures.”

Coqueran declined to comment on a news report Monday in the French newspaper La Tribune, claiming the Paris-based company is poised to sell the unit to Chinese manufacturer Nanjing Panda Electronics.

A deal with a Chinese company would make tremendous sense, according to Wood. “For Alcatel, this would unlock access to potentially the biggest and fastest growing mobile phone market in the world,” he said. “And for a Chinese partner, it would open the door to Europe.”

Chinese manufacturers, according to Wood, realize that mature markets, particularly Western Europe, are driven by brand as well as technology. “If a Chinese manufacturer could win a European partner like Alcatel, which has a trusted brand in several countries, it would be in a much better position to conquer market share rather than trying to establish its own brand identity.”

Who that partner could be is currently a matter of intense speculation. In addition to Panda, which already has a joint venture with Sweden’s Telefonaktiebolaget LM Ericsson, TCL Mobile Communication is rumored to be another company in talks with Alcatel.

Although close to the French company, Singapore’s Flextronics is viewed by Wood as an unlikely candidate. In 2001, Alcatel outsourced its handset production to Flextronics in a move to lower costs and stem losses. But by taking over this unit lock, stock and barrel, the Asian partner would jeopardize its manufacturing contracts with other handsets suppliers, including Sony Ericsson Mobile Communications, he said.