Transsion Holdings’ Journey to an IPO: Strengths and Challenges

Transsion Holdings, the top mobile phone OEM in the African market, plans to go public and list its shares on Shanghai’s tech-focused STAR Market. The company, which owns the brands Infinix, itel, and Tecno, aims to raise RMB 3 billion (approx. US$426 million) from the initial public offering (IPO).

Despite its dominance in the African mobile phone market and a solid operating revenue of over RMB 20 billion (approx. US$3.5 billion) in 2018, Transsion’s road to an IPO has not been easy. After Transsion Holdings submitted its IPO application to the Shanghai Stock Exchange, it received about 62 official queries from the regulator in May. This resulted in Transsion missing out on joining the first batch of firms to debut on the STAR Market in July. So far, Transsion’s IPO application has been approved by SSE, and it is now waiting for clearance from the China Securities Regulatory Commission. Investors still have concerns over the sustainable development of Transsion in the increasingly intense mobile phone market competition. Here, we will analyze Transsion’s strengths as well as the challenges it faces.

Strengths and Growth Opportunities

Transsion Group has built leadership in products, brand awareness, sales channels, user base, and supply chain in the emerging markets it has targeted, especially Africa. Smartphone adoption in the Middle East and Africa (MEA) region still fell below 50% as of 2018. In sub-Saharan Africa, smartphone adoption is only 36%. These are underdeveloped markets and offer a huge potential to grow. Transsion has built a strong foundation in this region and is in pole position to grab these growth opportunities.

Mobile phone shipments of the different Transsion group brands exceeded 135 million units in 2018, up 3% year-on-year (YoY), according to data from Counterpoint’s Market Monitor service. MEA, India and South East Asia (SEA) are the top markets for Transsion phones.

Exhibit 1: 2018 Mobile Phone Shipments Share of Transsion Group by Region

Source: Counterpoint Research Global Market Monitor Service Q1 2019

In MEA, Transsion was the undisputed leader grabbing over 30% share in 2018. Its share was twice that of Samsung (15%), the second-largest mobile phone OEM in the region. Transsion also dominates Nigeria, the largest market in Africa by population, with close to 60% of market share. In India, the second-largest market for Transsion, it ranked fourth in 2018 with a 6% market share, behind Jio (21%), Samsung (17%), and Xiaomi (12%). In SEA, Transsion ranked seventh with a 4% share of the market. In Bangladesh, Transsion has emerged as the second-largest player with a 13% market share.

According to the latest research from Counterpoint’s Market Outlook service, emerging smartphone markets like India, SEA, and MEA have the best growth potential. These regions will be critical for OEMs who are seeking expansion to offset the declining smartphone sales in mature markets.

With established channel resources and brand awareness in MEA, India, and Bangladesh, Transsion is likely to have a competitive edge over its competitors in grabbing the growth opportunities these markets offer.

The capability to provide African consumers with highly localized products is the key to Transsion’s success. Exhibit 2 shows some of the examples of how Transsion group managed to create product differentiations to out-perform in Africa.

Exhibit 2: Transsion’s technological partnerships and solutions for localization of products in Africa

Source: Transsion Holdings Prospectus, Counterpoint organized

Besides localizing hardware design, Transsion also invests in building a localized mobile internet ecosystem.

For the details of Transsion’s mobile internet services in Africa, the full analysis on its strengths and challenges, the comparison with HOVX, as well as evaluation on Transsion’s competitiveness in its targeted emerging markets, please refer to the full report at this link.