TCL Communication Announces Q1 2012 Results

Robust Sales of Smartphone Enhanced Overall ASP Confidence in Regaining Sales Growth Momentum from Q2 2012 Onwards

HONG KONG, April 26, 2012 /PRNewswire-Asia/ --

FINANCIAL HIGHLIGHTS

TCL Communication Technology Holdings Limited ("TCL Communication" or "the Company", together with its subsidiaries referred to as "the Group"; HKSE stock code: 02618) today announced the unaudited results of the Group for the three month ended 31 March 2012.

In the first quarter of 2012, a total of 7.8 million units of handsets and other products were sold, representing a decrease of 10% compared with the same period last year. Sales volume in overseas markets reached 6.5 million units, while sales volume in China was 1.3 million units, surged remarkably by 211% year-on-year. In spite of weaker demand for feature phone, the enhanced product mix enables the products of the Group with sustainable competitiveness. Accordingly, the average selling price ("ASP") improved from US$31.3 to US$34.6, and the total revenue therefore slightly decreased by only 1%, from HK$2,124 million to HK$2,105 million. Overall gross profit margin decreased slightly from 22% recorded in the first quarter of 2011 to 20% in the first quarter of 2012 due to weakened market demand and keen competition in the handset industry.

During the first quarter of 2012, the Group dedicated more resources to research and development, and significant breakthrough has been achieved in respect of smartphone validation. A series of smartphone models will commence shipment from Q2 2012 onwards. During the period, selling and distribution costs also increased along with the increase in advertising and promotional activities, especially in China, and smartphone shipment in domestic market increased month by month as a result. However, the first quarter of 2012 was still a ramp-up period for smartphones; growth momentum for smartphones is expected to take off once the new smartphone models will be launched from the second quarter onwards. As a result, net profit in the first quarter of 2012 decreased significantly by 87 % to HK$24 million. Basic earnings per share decreased to 2.3 HK cents from 16.3 HK cents over the corresponding period of the previous year.

Commenting on the performance, Dr. Guo Aiping, the Chief Executive Officer of TCL Communication, said, "Although our sales were affected by weakened consumer demand during the period under review, we continued to make achievements in a number of areas such as the launch of new products, market expansion, brand building and closer relationships with operators. We continued to broaden our distribution channels and expanded our markets into New Zealand and Myanmar, and further penetrated into high potential emerging markets such as Russia, Columbia, Indonesia and Vietnam. In China, we have successfully grasped market opportunities arising from the growing demand for smartphones and launched a series of new 3G Android products. We have also continued to build closer cooperation with the country's three major telecommunications operators and online media enterprises. With stronger R&D and product design capabilities, we have further enhanced our product mix with affordable price, which further consolidated our position in the world."

Due to the influence of unstable political status in Africa and European debt crisis, shipments to Europe, the Middle East and Africa ("EMEA") region decreased by 26% year-on-year to 2.5 million units. However, the Group still recorded strong growth in France and Spain as "Bic" phone (ONE TOUCH 204), the low cost feature phone marketed in France and Spain by Orange, was popular in the market. Sales in the Americas dropped by 21% year-on-year to 3.4 million units, amid in product transition period. Nevertheless, Columbia, Chile and Dominican Republic still achieved significant growth, thanks to the robust sales of entry-level smartphones, as well as the launch of dual-SIM products in the open market, and stronger sales in open markets and direct sales to distributors. In the Asia Pacific region, the Group's sales volume reached 0.6 million units, increasing by 10% as compared with the first quarter of 2011. The Group recorded remarkable performance in Indonesia, Vietnam, Israel and the Philippines, and the Group's low-end camera phone, the ONE TOUCH 318D, was the best seller in the APAC region.

The Group achieved impressive performance in China. In the first quarter of 2012, the sales volume of handsets in the China market reached 1.3 million units, surged remarkably by 211% year-on-year. This growth was mainly driven by the robust sales of smartphones, the expansion of the Group's sales network, as well as the increasing popularity of the Group's products due to their competitive prices and innovative designs and features. In view of the increasing demand of smartphones, the Group continuously launched a series of 5 new smartphones, which received an overwhelming response from the market. In addition, the Group has broadened its sales channels by strengthening cooperation with the country's three major telecommunications operations. Breakthroughs were achieved in Shanxi, Tianjin, Zhejiang, Gansu, Liaoning and Shenzhen, and the Group broadened its channel distribution in third and fourth-tier markets. In addition, the Group also enhanced its cooperation with its e-commerce partners and established online sales channels on 360buy.com, Tmall and Suning.com during the quarter under review.

Most of the new products launched during the period under review received positive market responses and were selected by global major telecommunications operators such as China Mobile, China Unicom, China Telecom, Orange, Telefonia, etc.. In January 2012, the TCL E906 smartphone was selected for China Mobile's 2012 first G3 smart terminal centralized procurement, shortly after the Group's TCL W989 was selected by China Unicom for its new 4.0 series products a month earlier. ONE TOUCH 995 ULTRA also came into the spotlight at the International Consumer Electronics Show (CES) 2012 with its modern design and innovative features. In February 2012, the Group launched the TCL A966, its first 3.5-inch QQ smartphone which features a number of pre-installed Tencent cloud applications, as well as the TCL A998 smartphone, which incorporates a wide range of Sohu applications. In addition, the Group also launched in China the T50, a new tablet boasting a 7-inches display and 3G and Wi-Fi, in the first quarter of 2012. The Group's products have gained recognition from both customers and the industry with the reception of prestigious awards including the "Red Dot Award: Product Design 2012" awarded to ONE TOUCH 916 in March 2012.

Looking to 2012, the Group expects the business environment for the industry in both China and the overseas markets to remain challenging, with the increasingly intense industry competition and weakened consumer sentiment due to volatility in the global economy. Nevertheless, buttressed by the solid results which the Group has achieved over the previous years, its reputable brand, strong R&D capabilities, diversified product portfolio and extensive market presence, the Group is confident that it will regain its sales growth momentum from the second quarter onwards, with its business in China and the sales volume of smartphones to be its major growth drivers. The Group will launch an array of new smartphones from the second quarter of 2012 onwards, including the 3G Android models that were successfully selected by China Unicom (Model TCL W939 and TCL W969) and China Mobile (Model TCL E906), while also continuing to improve the style, functionality, quality and competitiveness of its products, especially its smartphones.

In addition, the Group will continue to enhance its market penetration in China by launching new products customized for local consumers, expanding its distribution network, and fostering partnerships with the three major telecommunication operators and major online media enterprises. The Group will speed up the distribution expansion by increasing its points of sale from 4,200 to 6,000 by the end of the second quarter of 2012. Meanwhile, the Group will continue to reinforce its leading position in the global handset market by launching more new products and extending its global reach, especially new, high-potential markets and emerging markets.

The Group expects a gradual improvement in sales from the second quarter onwards, and reiterates that its target for the year 2012 is to achieve a 30% year-on-year increase in revenue. The Group will also aim to improve the operational efficiency of its product value chain, the efficiency of its supply chain and the effectiveness of research and development in its projects, so as to consolidate its leading position in the industry and to pave way for long-term growth in future.

Sales volume breakdown by market

About TCL Communication

TCL Communication Technology Holdings Limited (stock code: 02618.HK), together with its subsidiaries design, manufacture and market an expanding portfolio of mobile and internet products worldwide under two key brands - TCL and ALCATEL ONE TOUCH. The Group's portfolio of products is currently sold in the PRC and over 120 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific. TCL Communication operates its highly efficient manufacturing plants and R&D centres in various provinces of the PRC with headquarters in Shenzhen, China. For more information, please visit its website at http://tclcom.tcl.com.

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