Pantech Wins US Deal Worth $1.6 Bil.

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Pantech Wins US Deal Worth $1.6 Bil.


2004-12-20

Korean cell phone producer Pantech & Curitel signed a contract to export a total of 10 million handsets worth $1.6 billion to U.S.-based distributor Audiovox Communications.

Curitel, Korea`s third-biggest handset vendor along with sister firm Pantech, on Monday said it had inked the one-year contract, which is the biggest-ever export deal reached by a Korean phone maker.

The mega contract also requires Audiovox to market the 10 million phones under the Pantech label instead of the previous format of the original design manufacturing (ODM) system.

The export value exceeds Curitel`s annual turnover for 2003 and contrasts with Korea`s total outbound shipment of handsets this year of $2.45 billion.

Audiovox will supply the phones to 12 mobile operators in North America, including Verizon and Sprint, throughout next year.

``The large-volume exports, which will boost our stake in the North American CDMA phone market to 15 percent, will help Pantech become one of the world`s top-five brands,`` a Curitel official said.

Pantech Group made inroads into the United States in 1999 and has marketed its products mainly under ODM contracts with Audiovox Communications.

The group`s sales in the North American market have skyrocketed from 1.9 million units in 2002 to 3.7 million last year. The figure is expected to surge to 7 million this year.

Curitel looks to fill 35 percent of Audiovox-bound merchandise with premium models next year such as third-generation phones and mega-pixel camera-embedded phones.

Overcoming ODM Barrier

Despite the brisk sales, Pantech`s brand power has been relatively limited compared to its real presence because many of its products have been exported as ODM.

The term refers to companies that sell merchandise designed and produced on their own under other brand names.

In the initial stage, the strategy served as an important growth engine for Pantech in the global market, but it became a barrier as the group expanded.

Besides the low exposure to end users, Pantech has failed to get proper evaluation for its market share since international research firms exclude ODM products from their calculations.

To overcome the ODM snag and jazz up its label, Pantech tried to build up its own sales and distribution networks in the U.S. by acquiring Audiovox Communications, an affiliate of New York-based car audio maker Audiovox.

Pantech inked a memorandum of understanding with Audiovox and was on the brink of signing the takeover contract when the negotiations fell apart at the last minute as UTStarcom, which mainly sells wireless equipment in China, jumped into the bidding war with a higher price in June.

Instead, Pantech Group opted to strengthen its U.S. subsidiary, P&C Communications, by investing $10 million as well as establishing five branches in the U.S. and Canada _ New Jersey, Atlanta, Kansas City, Seattle and Toronto _ by next March.

Pantech plans to sell 2 million handsets through the Los Angeles-headquartered P&C Communications next year on top of the 10 million in exports to Audiovox.

Based on these efforts to increase its foothold in the world market, Pantech Group`s vice chairman Park Byeong-yeop said the group will enter the ranks of the world`s top five cell phone makers in 2005.

``By expanding our own brand-labeled exports to Russia, Mexico and the Middle East and by streamlining our business system in the U.S., we aim to boost our total exports to over $3 billion next year,`` Park said.

 


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