Investors are about to hear much more about Shenzhen Transsion
Shenzhen Transsion sells almost every second mobile phone in Africa under its brands Tecno, itel and Infinix. A Tecno Mobile store in Nairobi, Kenya. Photo: Xinhua/ZUMA PRESS
Chinese mobile-phone brands Huawei and Xiaomi have become well-known names globally. But there is a third Chinese company that has grown to be one of the world’s largest phone makers without garnering much publicity. Investors are about to hear much more about it.
Shenzhen Transsion will be among the first batch of companies to list on Shanghai’s new board, which wants to become a stock market for the country’s best technology companies—essentially China’s take on Nasdaq. Founded in 2013, Transsion now sells almost every second mobile phone in Africa under its brands Tecno, itel and Infinix.
It didn’t come to dominate Africa, a continent with 1.2 billion people, by selling flashy smartphones. Instead, Transsion mainly offers feature phones, or “dumb phones,” at prices as low as $10. About 70% of the 133 million phones its shipped last year were “dumb.”
The strategy has worked well so far, turning Transsion into the world’s fourth-largest phone maker by phone shipments. Due to low incomes and poor networks, most people still stick to feature phones, which accounted for around 60% of mobile phones shipped there last year.
However, this could be changing. Smartphone shipments are expected to grow 5.4% this year, while those for feature phones will decline 5.1%, according to IDC.
This will be good news for Transsion. Even though it sold a lot more feature phones than smartphones, it made much more money from the latter: 70% of its revenue in 2018 came from smartphones. Transsion’s brand recognition may make consumers stick with the company when they upgrade.
The dumb-to-smart switch should therefore boost Transsion’s net margins, which stood at just 2.9% last year. The company shipped slightly more cellphones than its peer Xiaomi last year, but because they were budget models its operating profit was only a fifth of Xiaomi’s.
Transsion’s exposure to Africa—a rarity among publicly listed stocks—could attract a lot of attention. Shares in Jumia Technologies, an online marketplace dubbed the Amazon of Africa, has more than doubled in the five trading days since it was listed in New York last week.
Foreign investors likely won’t be able to participate in the new Shanghai exchange when it first launches in the coming months. While they wait for the eventual opening, though, they should keep an eye on Transsion. China’s dumb-phone giant could prove a smart bet.
Source: The Wall Street Journal