the French electronics company that had a near-death experience in the
mobile phone market, is back in business thanks to China's TCL. But the
relationship is not without its challenges.

“I'm still learning French,” says Fei Liu, CEO of TCL Communication,
the mobile phone division of TCL Holdings, which has rescued the
Alcatel brand.

After many months of silence, the company held a press conference at
the 3GSM event in Barcelona to promote the virtues of the new Alcatel
that has risen from the ashes of the old.

“This is a comeback for the Alcatel brand,” said Eric Vallet chief marketing officer of the JV, called TCL Communication.

The Alcatel name is being used in Europe while in China and HK, TCL
will continue to sell phones — not necessarily the same models —
under the TCL band.

Alcatel has had an poor track record in Europe's mobile phone
market, partly because of its heavy dependence on the cut-throat
pre-paid market, in which operators heavily subsidise the handsets to
get customers to switch — creating the so-called churn problem.

Mobile phone penetration rates in Europe are over 90% so it is
almost impossible to find a customer who has not already got a mobile
phone. Churn is bad for the operators, but it is potentially fatal for
handset suppliers as they are under continual pressure from operators
to develop every more sophisticated phones that they must sell to the
operators at rock-bottom prices.

Mr Vallet told EngagingChina that Alcatel would
continue to focus on the pre-paid market but argued that it was now
better placed to weather the tough conditions.

“We now have the best of both worlds: the cost structure of a
Chinese manufacturer and the design and quality of a European company.
Nevertheless we are under no illusions and we don't plan to to go
head-to-head with the top five phone manufacturers. Its a very
pragmatic recovery and we do not want to soar like a sky rocket.”

Instead, the company is focussing on gradually expanding its line-up
of phones — 15 are planned for this year — while staying under the
all-important €100 price point that Alcatel has decided is the most
that customers are prepared to pay for a stand-alone phone without a

Fei Liu painted a vivid picture of the intense competition in mobile
phone manufacturing industry in which product development cycles have
fallen for 18 moths a few years back to just six to nine months today.
“It will probably drop to 100 days,” he said.

Alcatel's phones certainly look a lot better than when EngagingChina
remembers from two or three years ago — see photo above of its Elle No
3 “fashion phone”.

Nevertheless, Alcatel currently enjoys a meagre 6% share in France
and less in other European countries, Alcatel certainly has its work
cut out if it wants to shake off the also-ran image.

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