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Indian Handset Maker Micromax Eyes Stake In Pantech

By Min-Jeong Lee and R. Jai Krishna

Micromax Informatics, a privately held Indian handset maker, is eyeing a stake purchase in struggling South Korean peer Pantech, in which Qualcomm and Samsung Electronics005930.SE +0.37% own a stake, people familiar with the situation said Monday.

Pantech, after struggling to eke out a profit in the global smartphone market, decided last year that it will focus on domestic sales only. But competition in its home market has been stiff with Samsung and LG Electronics ag066570.SE +0.29%gressively churning out new models, leading the company to seek help from its creditors in February. The company is currently under review by its creditors to find an optimal way to restructure its massive debt of more than $1 billion.

“Merger and acquisition is being reviewed as a promising way to [revive] the company,” one person familiar with the matter said. The person said while it would be favorable for Pantech to be acquired by another Korean company, there hasn’t been much interest from potential buyers.

“The decision will be made by the creditors, after [relevant] due diligence has been conducted,” another person familiar with the matter said.

It’s unclear whether Micromax would buy a minor stake or a controlling one.

An investment by New Delhi-based Micromax,which currently ranks second in terms of smartphone shipments in India behind Samsung, could help the company in its global ambitions to expand outside of India, the world’s third-largest smartphone market by users. Micromax could also benefit by having access to Pantech’s high-end smartphone technologies as well as its manufacturing facilities, analysts say. Pantech would benefit from Micromax’s broad retail sales channels in India, they said.

Micromax is backed by U.S. private equity firms Sequoia Capital and TA Associates.

An investment by Micromax could also kickstart consolidation in the crowded smartphone market in Asia, where manufacturers are targeting global markets by offering better quality smartphones at much lower prices than Apple and Samsung.

As of Sept. 30, Pantech’s debt stood at $1.18 billion, surpassing its total assets of $998 million. It has reported six straight quarters of net losses, according to regulatory filings.