TCL, LeTV in HK$2.2b strategic deal

TCL Corp and LeTV Holdings Co Ltd - two of the mainland's leading electronics and television conglomerates - have struck up a strategic pact to ride out the stiff competition in the television industry.

The two companies announced the tie-up in Shenzhen on Monday after the country's major online video company LeTV bought 348.9 million shares of TCL Multimedia Technology Holdings Ltd at HK$6.5 per share through its subsidiary LeTV Zhixin Electronic Technology (Tianjin) Co Ltd.

Total investment came to HK$2.27 billion, making LeTV the second-largest shareholder in TCL Multimedia with about 20 percent of the shares.

TCL Corp, based in Huizhou, Guangdong province, and Beijing-based LeTV Holdings said that with capital cooperation, they will jointly develop high-quality innovative products and other vertically integrated services to leverage their combined user base and transform it into a new business model.

TCL said it might jointly launch a new product in future, but the most possible cooperation format for now is to insert LeTV content and UI (user interface) system into its new televisions.

The deal signals a major strategy deviation by key industry players as traditional TV manufacturers and Internet firms have been steadfast competitors in the past.

"We used to look down on each other and even dream of eliminating each other's business," said Bo Lianming, chief executive officer of TCL Multimedia.

But now, both sides have found each other beneficial -both sides will share their user and supply chain resources. So far, LeTV has about 4 million smart TV users, while TCL has 11 million.

Jia Yueting, founder and chief executive of LeTV, said he was impressed by TCL's comprehensive supply chain of hardware products, adding that their cooperation can accelerate LeTV's globalization effort.

Getting a hold in overseas markets is also a prime target of the deal. Ablikim Ablimit, vice-president of strategy management at LeTV, said LeTV plans to penetrate further into foreign markets after having launched operations in the US.

TCL has developed its overseas markets for about a decade, while LeTV has many international intelligent properties. Bo believes that TCL's international resources can substantially save LeTV's globalization costs, and their tie-up is a win-win strategy to help Chinese brands "go out".

TCL estimates its television sales will hit 17 million globally this year, while LeTV expects three million this year and double it in 2016, focusing on the middle- and high-end markets.

Fan Yang, an analyst at Guotai Juan Securities, said the market has long regarded the LeTV model and that of traditional TV producers as being at odds, but such strategic cooperation shows they want to seek out a direction in the industry.

TCL Multimedia Technology Holdings saw its share price slip 3.03 percent to close at HK$4.8 in Hong Kong on Monday, while the Hang Seng Index shed 0.74 percent.

grace@chinadailyhk.com

(HK Edition 12/15/2015 page11)