Telling Responds to Reports of Major Losses
Shenzhen Stock Exchange, 11/01/12
The 21st Century Business Herald reported recently that Chinese handset distributor Telling Telecom Holding (000829.SZ) was facing severe financing problems after Telling Communications Corporation, a subsidiary in which Telling Telecom holds a 70% share, reported a loss on Q1-Q3 2012 operating revenues of RMB 26.26 bln. Telling Communications has turned to its parent company for financial support frequently in recent years, with Telling Telecom acting as guarantor for RMB 6.5 bln in one-year loans from 2009 to 2011, and another RMB 650 mln in loans in April 2012. The newspaper reported that the scale of the loans places Telling in violation of regulations.
In response, Telling Telecom issued a clarification on the evening of October 31 in which it conceded that "the company increased stock clearance efforts this quarter in order to avoid greater losses caused by falling prices resulting from the rapid growth of the smartphone market and generational upgrades in increasingly quick succession," causing Telling Telecom to report net Q3 losses attributable to the listed company of RMB 13.16 mln despite more than RMB 26 bln in operating revenues for the quarter.
Telling Telecom denied, however, that it had violated regulations in acting as guarantor for its subsidiary's loans, saying that it was acting to minimize risks inherent in the loans. Telling Telecom has requested that Telling Communications provide it a counter-guarantee. Telling Telecom's statement added that "as the company has more than RMB 2 bln in assets, there is clearly no risk of assets being insufficient to cover debts." Responding to claims about financial issues, Telling Telecom said that its asset-liability ratio had fallen from 70% in early 2012 to 65% at present, and that it has ample operating funds.
Editor's Note: For more background on this topic, please see "Telling Records Q3 2012 Loss of RMB 60 Mln" MD 10/30/12 issue.
Keywords: handset loss wireless 000829.SZ Telling distribution regulation
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