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Huawei to sell $15 billion Honor unit to Shenzhen government, Digital China, others: Sources

Huawei plans
sell budget-brand smartphone
Honor in a 100 billion yuan ($15.2 billion) deal
to a consortium led by handset distributor
China and the government of its home town of
Shenzhen, people with knowledge of the matter told Reuters.

The plan comes as U.S. restrictions on supplying
Huawei Technologies Co Ltd force the world’s second-biggest smartphone maker – after South Korea’s Samsung Electronics Co Ltd –
to focus on high-end handsets and corporate-oriented business, the people said.

It also indicates little expectation for any swift change in the U.S. perception of
Huawei as a security risk following a change in U.S. administration, one of the people said.

The all-cash sale will include almost all assets including brand, research & development capabilities and supply chain management, the people said.
Huawei could announce it as early as Sunday, one of the people said.

Honor distributor
China Group Co Ltd will become a top-two shareholder of sold-off entity
Honor Terminal Co Ltd with a near-15% stake, said two of the people.
Honor Terminal was incorporated in April and is fully owned by
Huawei, the corporate registry showed.

China, which also partners
Huawei in businesses such as cloud computing, plans
to finance the bulk of the deal with bank loans, the two people said. It will be joined by at least three investment firms backed by the government of financial and technology hub
Shenzhen, with each owning 10%
to 15%, they said.

After the sale,
Honor plans
to retain most of its management team and 7,000-plus workforce and go public within three years, the people said, declining
to be identified due
to confidentiality constraints.

Honor declined
to comment.
China and the
Shenzhen government did not immediately respond
to requests for comment.


The U.S. government last year moved
to prevent most U.S. companies from conducting business with
Huawei – also the world’s biggest telecoms equipment vendor – citing national security concerns.
Huawei has repeatedly denied being a security risk.

In May, Washington announced rules aimed at constricting
Huawei‘s ability
to procure chips featuring U.S. technology for use in fifth-generation (5G) telecommunications network equipment and smartphones such as its premium P and Mate series.

Huawei established
Honor in 2013 but the business mostly operates independently. Divestment will mean
Honor is no longer subject
Huawei‘s U.S. sanctions, analysts said.

Honor sells smartphones through its own websites and third-party retailers in
China where it competes with Xiaomi, Oppo and Vivo in the market for lower-priced handsets. It also sells its phones in Southeast Asia and Europe.

Honor-brand smartphones made up 26% of the 51.7 million handsets
Huawei shipped in July-September, showed estimates from researcher Canalys.
Honor‘s products also include laptops, tablet computers, smart TVs and electronic accessories.

With margins thin for lower-end phones,
Honor booked about 6 billion yuan in net profit on revenue of around 90 billion yuan last year, said one of the people, citing audited figures. ($1 = 6.5775 Chinese yuan renminbi)