Micromax may buy stake in debt-ridden S Korean cellphone maker Pantech

Micromax Informatics Ltd, India's mobile handset maker backed by private equity firms TA Associates and Sequoia Capital, is weighing a plan of buying a stake in South Korea's debt-ridden Pantech Co Ltd, according to a Reuters report.

Micromax told Pantech that it was interested in buying a stake in the company, one of the sources told the news agency, without disclosing the size of stake or financial details, while another source said that Micromax is among those who are interested in the Seoul-based company.

Founded in 1991 as a pager manufacturer, Pantech is the third best-selling mobile handset maker in South Korea after Samsung Electronics and LG Electronics, and manufactures smartphones under contract for two US wireless carriers, AT&T and Verizon.

Korea Development Bank (KDB) is its largest shareholder with 13.39-per cent stake, followed by chipmaker Qualcomm Inc with 11.96 per cent and Samsung Electronics holding 10.03 per cent.

Pantech, which has been struggling amid stiff competition from rivals like Samsung, Nokia and LG, had put its two handset-making units under debt restructuring program in February after posting six consecutive quarterly losses beginning from the third quarter of 2012.

The two units had amassed debts of 1.48 trillion won ($1.6 billion). It owed 642.8 billion won to KDB, and 11 other banks, while the remaining is owed to secondary financial institutions and individual investors.

The latest debt restructuring came after it ended a four-year and eight-month debt restructuring program in December 2011.

Pantech sales have slid by 40 per cent on-year to 1.07 trillion won ($999 million) in the first nine months of last year and it posted an operating loss of 245 billion won.

Micromax, India's No 2 smartphone maker, which started just five years back selling IT software and telecom gear, gained entry into the mobile handset market with a $30 made-in-China model.

The company's Android-based phones starting at $50 - almost half the price of a comparable Samsung model, have brought smartphone technology into the mass market in a largely price-sensitive market where basic handsets still dominate.

With mobile internet prices in India starting to fall, the smartphone market took off as Micromax and other local vendors of low-cost China-  and Taiwan-made phones such as Karbonn and Lava pushed hard into small towns.

Unlisted Micromax now plans to go upmarket and overseas. Early this year it started selling in Russia, followed by Romania, where competitors also include Samsung and Nokia.

The company had also entered the Brazilian and the Middle Eastern markets with basic phones, but could not build scale and had to  shut operations.

According to industry watchers, Micromax has its work cut out as it pushes into more expensive segments dominated by global brands and builds its brand from scratch in new markets.