Although 90 percent of its income was generated from sales in overseas markets, including the US, Latin America and European countries, TCL Communication Technology vows to grab a bigger share in the highly-penetrated Chinese mainland smartphone market. Bloomberg News Photo

Entry into new markets and strong sales in some existing ones are expected to boost sales of Hong Kong-listed TCL Communication Technology Holdings Ltd this year by at least 30 percent, compared with a year ago, to about HK$40 billion.

The Shenzhen-based mobile-phone manufacturer had earlier posted a net profit of HK$185 million for the first three months of 2015 - up 5 percent from a year earlier period on revenue of HK$6.69 billion.

Despite increased sale prices, the company's profit margin in the first quarter slipped to 19.1 percent from 19.6 percent.

In an exclusive interview with China Daily in Hong Kong, TCL Communication Technology Holdings Chief Executive Officer Guo Aiping, while declining to forecast the company's profit, said he was not too concerned about the narrowing profit margin, which has been caused mainly by currency depreciation in some markets, particularly Russia and the European Union.

He said TCL is confident about achieving its revenue target this year due to strong sales on the Chinese mainland and in South Africa. The company is also making inroads into new markets, especially South Korea, where the sales potential is promising.

Unlike most other mainland mobile-phone makers that depend on domestic sales, TCL generates 90 percent of its income from sales in overseas markets, including the US, Latin America and European countries.

The company acquired Paris-based Alcatel Mobile Phone Ltd in 2005 and, currently, all of its products selling overseas are under the brand name "Alcatel".

Guo said TCL has avoided direct competition with major global vendors by focusing on the mass market. This strategy, he said, works much better in overseas markets than on the mainland where competition in this segment is fierce.

"The competition in the low-end, mobile-phone market on the mainland is fierce. Everybody is selling mobile phones. It's really hard to squeeze a decent profit in this cut-throat environment," he said.

As such, TCL's market share on the mainland has remained small, at about 2 percent.

Guo said TCL has no intention to abandon its home market despite the razor thin profit margins. He plans to introduce a wider range of high-value-added smartphones that support the increasingly popular LTE (Long Term Evolution) network service.

"We can't afford to ignore the mainland market as it has very high smartphone penetration rate and the infrastructure of the Internet is also in a world leading position," he said.

Guo predicts that TCL's mobile-phone sales in the mainland market will more than double this year, putting the company back on the top 10 mobile-phone brands list. "I'm not worried. The company's sales will continue to grow and the economics of scale will boost its profit margin."

TCL's H shares dropped 1.2 percent to HK$8.3 apiece in Hong Kong on Monday - down 18.6 percent from its peak on April 10.

sophiehe@chinadailyhk.com

(HK Edition 05/19/2015 page10)