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Transonic holdings is a leading mobile phone brand in Africa. It was listed on the Shanghai Stock Exchange in September 2019, with a market value of 110.8 billion yuan (16.9 billion US dollars). On the first day of listing, investors got 146% return in just 15 months (see figure below).

Stock price performance of Chuanyin holdings in Shanghai Stock Exchange from September 2019 to November 2020

Source: refrinitiv

According to the report, in the first three quarters of 2020, the operating revenue was 25 billion yuan (US $3.77 billion), and the net profit was 1.95 billion yuan (US $295 million), with a year-on-year growth of 48% and 50% respectively. Although the supply chain and distribution channels have been affected by the epidemic of covid-19, the performance of Chuanyin holding has exceeded expectations. With its unique low price strategy, product localization, mass marketing and three pronged brand strategy, Chuanyin holding has made great returns in Africa, a highly dispersed market.

Source: transition holdings investor relations

Africa: a neglected Market

International giants such as Nokia and Samsung usually push mobile phones designed for consumers in developed countries directly to major cities in Africa, without in-depth understanding of local economic conditions and customer needs. From the beginning, Chuanyin Holdings has established a business strategy of bypassing big cities and targeting small cities and rural areas. In order to establish the brand image, the company invested a lot of money to establish distribution channels, carry out marketing, and adjust the promotion strategy according to the actual situation of different regions. In order to have a deep understanding of the local market, the company even sent Chinese headquarters managers to Africa for a long time.

In the past 10 years, driven by infrastructure and social factors, great changes have taken place in Africa’s science and technology industry. Many countries began to develop technology, promote urbanization and expand the coverage of mobile networks (see figure below), which laid the foundation for the rapid popularization of smart phones.

Urban population (%) of total population

Source: World Bank

Number of people covered by mobile broadband networks (3G and above) in sub Saharan Africa

Source: GSMA

Proportion of adults using the Internet or owning smartphones

Source: Pew Research Center

The Pew Research Center’s research in six African countries (see figure above) shows that education and age are more important factors for consumers to buy smartphones and use the Internet than socio-economic variables such as income level and gender. To use the Internet on a smartphone, consumers need a certain level of literacy (two out of every three adults in Africa are illiterate, according to the World Bank). In addition, reliable power supply is needed for mobile Internet access, but the power supply in Africa is not stable. It can be seen that educated young urban residents are the first group to buy smart phones. We expect that this part of consumers will be the driving force for the popularization of smart phones and the Internet in the future. In the next 10 years, Africa’s population aged 20-39 is expected to increase to 506 million, an increase of 30% (source: United Nations Department of economic and Social Affairs).

Recent performance

After more than ten years of development, transonic Holdings has established three well-known mobile phone brands: Tecno, itel and infinix. According to the latest research of counterpoint market monitor service, in the third quarter of 2020, these three brands together accounted for 38% of smartphone shipments in Africa and 67% of feature phone shipments, surpassing Samsung and Huawei. To be specific, voice plays a leading role in the low-end market. In the third quarter of 2020, the three major brands accounted for 45% of mobile phone shipments in the price range below $100.

来源:Counterpoint Report – Transsion Holdings: Ascent of Africa’s Smartphone King

From: counterpoint research

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