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Huawei in talks to sell off Honor business for $15bn

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Huawei is planning to offload its Honor budget-smartphone unit to a Shenzhen government-led consortium in a 100 billion yuan ($15.14 billion) deal, according to reports.

Founded in 2013 by the multinational Chinese telecommunications giant, the sub-brand develops a line of cost-effective smartphones, which enabled Huawei to compete with mid-range online smartphone brands in China and globally.

Honor sells its products mainly online through its own sites as well as via third-party online retailers.

The embattled telecommunications company has been facing pressure following restrictions imposed by the US, after the US Department of Commerce put Huawei on an export blacklist, citing “national security threats” due to the company’s close ties to the Chinese government.

Huawei, which expects little change in the sanctions under the newly-elected Joseph Biden-led US government, will now focus only on high-end handsets and its corporate-oriented business.

According to a Reuters report, the consortium, which consists of handset distributor Digital China, the Shenzhen government and other organisations, has been in talks with Huawei for a while, over the all-cash sale which is expected to include almost all Honor assets, including brand, research and development capabilities and supply chain management.

Hong Kong Stock Exchange-listed Digital China will become a top-two shareholder of sold-off entity Honor Terminal, with a near 15% stake, two sources told Reuters.

Digital China, which also partners Huawei in businesses such as cloud computing, plans to finance the bulk of the deal with bank loans, and will be joined by at least three investment firms backed by the Shenzhen government, with each owning 10% to 15%, notes the report.

The US sanctions on Huawei have resulted in the telco replacing Google Mobile Services on its smartphones with its native alternative Huawei Mobile Services, an indication that the world's second biggest smartphone maker, after Samsung, is increasingly enduring the negative effects of the ban.

Since its debut, theHonor brand has sold over 66 million devices worldwide, and managed to climb up to the number seven spot in terms of global smartphone rankings, according to GfK estimates.

Honor launched in the South African market in 2018, and has since released a range of phones after partnering with online shopping platform Takealot for the sale of its devices.

At the time of its local launch, Honor said Africa will play an important role in changing Honor's revenue split, which was projected to consist of 50% of sales made within China and another 50% of the rest of the markets across the world by 2020.

"We haven't set specific sales targets for Africa at the moment but we believe there is space for this brand here. We've done well in China, Europe, America, Middle East, India and Russia where competition is very high. The users will make their own judgement as to which phone in the market is more durable, of better quality and gives a better experience. We don't see the other brands as competition for as long as we strive to make better phones that users like. We are our own competition," Chris Sun, VP for Honor in Middle East and Africa, said at the time.

Last year, Honor extended its channel network in the South African market, allowing Honor-branded devices to also be purchased offline through a partnership with Foschini stores.

While it’s not clear how the Honor acquisition will affect Huawei’s African business, it is planning to retain most of its management team and 7 000-plus workforce, notes Reuters.

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