Hong Kong-listed TCL Communication Technology Holdings Ltd said yesterday it posted a net loss of HK$223.54 million (US$28.6 million) in 2004, after making a profit of HK$784.16 million (US$100.5 million) the year before, as a result of weak sales and losses at its joint venture with Alcatel.

For the fourth quarter to December, the company posted a net loss of HK$378.42 million (US$48.5 million), a sharp contrast to a net profit of HK$232.28 million (US$29.7 million) in the same quarter of 2003.

For the whole fiscal year, the company's revenues reached HK$7.31 billion (US$937 million).

"The overall operating environment for the handset industry in China last year was worse than everyone could predict," Li Dongsheng, TCL's chairman said.

"There was an oversupply following expansion of mobile handset suppliers," he said.

According to the company's statement, its joint venture with France's Alcatel - TCL & Alcatel Mobile Phones Ltd - posted a loss of HK$258 million (US$33 million), as a result of ferocious market competition and high costs for an operation in its early stages.

Li said that the synergies from the partnership of its unit with Alcatel, "had an adverse impact on the group's operations."

TCL Communication Technology last year realized sales of 10 million handsets, with 2.5 million from the joint venture.

TCL said it did not cut its prices significantly amid competition, but sales were affected on delays in new product launches.

It sold 6.7 million handsets in China under the TCL brand, but its market share was lower at 6 per cent, although it is still among the top five suppliers.

"The result is within our expectations as the handset industry is confronted with more fierce market competition than ever before," said analyst Zhang Bin at CITIC Securities.

He believes that exposed to the tough competition from foreign brands, domestic handset makers should try to better analyze domestic market demand to produce handsets specifically targeting that market.

(China Daily April 19, 2005)