Can DBS help boost TCL Communication’s profits?

China’s economy may be among the top in the world, but things are not as rosy in its communications industry. With a bit of aid from DBS, will things turn for the better for TCL Communication?


DBS Bank is looking into buying up to $45 million of convertible bonds from TCL Communication Technology Holdings, the mobile phone unit of China’s biggest publicly traded maker of consumer electronics.

The Singaporean lender may agree to buy $27 million of TCL Communication's zero-coupon bonds, with an option to buy a further $18 million of the securities, the mobile-phone company said. The bonds are convertible to TCL Communication shares at HK$0.375 apiece.

The mobile-phone company reported a net loss of HK$49.9 million for the first nine months of 2006 and a loss of HK$1.7 billion in 2005. TCL Communication said it will raise HK$204.6 million ($26.2 million) from the bond sale, and the money will be used as “general working capital” to repay existing debt. Trading in the company's Hong Kong-listed shares was suspended and resumed a day after.


If TCL Communication’s profits are not rolling in as steadily as other mobile companies, why is DBS still choosing to buy bonds from the company? Is the Singaporean bank hoping that the telecommunications industry in China will take a turn for the better, and perhaps eventually translate into a more successful 3G wireless infrastructure? What do you think?