Electra Consumer Products Ltd. (TASE:ECP) reported to the stock exchange yesterday that it had acquired 70% of ownership and control of Alpha Telecom, the exclusive importer and distributor of Chinese mobile phone company Huawei in Israel and the Palestinian Authority.
Alpha Telecom is owned by PL Group and the Lahav Fund. After the completion of the deal, Electra will control 70% of the company, PL Group will control 21% and the Lahav Fund will control the remaining 9%. Control of the company was transferred for an injection of dozens of millions of shekels for working capital required to expand operations.
Electra said that following the deal, its debt balance will increase bya further NIS 72 million. In addition, it was stated that Electra will be required to provide a credit facility of up to NIS 200 million for Alpha, which means that the company's working capital needs are about to significantly expand, requiring a controlling shareholder with deep pockets.
Electra Consumer Products CEO Zeev Kalimi told "Globes" that Electra intends to continue controlling the Sony brand franchise and the two brands will continue operating separately. Kalimi commented on the possibility that Electra decided to acquire control of Alpha after the Sony mobile phone brand had fallen short, "We do not think that the brands compete with each other. Sony appeals to a different target market in Israel and overseas. Sony is a premium device in its value proposition and in what it gives the consumer, while Huawei is more of a mainstream brand. Therefore, these are two products in the same category that could complement each other, rather than compete."
Kalimi said that operations will remain separate and that Alpha Telecom CEO Kobi Kalif will continue managing the company.
Although Kalimi continues claiming that Sony's mobile phone brand is a success in Israel, he also says, "I want to be in the volume market in mobile telephones and Huawei is exactly the brand that can achieve this. Electra has been in mobile since the Sony Ericsson era, and these operations generated turnover of hundreds of millions of shekels. After Sony acquired Ericsson's stake, shut down Ericsson and changed its name and operations, we have stayed with them."
What will you do to better succeed this time?
"Huawei's starting point is much better. It currently has an 8% market share which is an excellent starting point. We have systems which can be synergetic and promote the brand and we have acquired years of experience; we believe that it can turn into the number 2-3 brand in Israel in a reasonable time. This is our aspiration."
The Huawei mobile phone brand has been gaining momentum in Israel and overseas and the company is becoming not only one of the world's leading mobile infrastructure companies but also a leader in end-user equipment.
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2016
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