(Yicai Global) Sept. 15 -- Shares of Chinese phone dealer Telling Telecommunication Holding plunged after the firm confirmed it is acquiring Tinno Mobile Technology's handset trademark, not ex-Huawei brand Honor.

Telling’s share price [SHE: 000829] closed down 10 percent at CNY19.61 (USD3), hitting the lower limit for the third straight trading day. Its market value shrank to CNY20.1 billion (USD3.1 billion).

The phone distributor will purchase parts of research and development, as well as supply chain assets of the Shenzhen-based firm's handset subsidiary, the Beijing-headquartered buyer said in a statement yesterday. Tinno makes products for third-party retailers and sells its own devices under brands such as Sugar Phone and Wiko Mobile.

Anticipation regarding the acquisition had boosted Telling's stock price more than three times since late August. The Shenzhen Stock Exchange wrote a letter to the firm on Sept. 12 and asked it to explain if the upcoming acquisition -- the target of which was not disclosed yet -- is motivated by shareholders' potential plans of selling some of their equity.

The suspected moves to hype up Telling's stock price were denied. Telling's shareholder Beijing International Trust sold 450,000 shares on Sept. 8 and 550,000 on Sept. 9, the firm said in a letter to the bourse yesterday. However, negotiations regarding the deals began on Sept. 1 so the transfers are not linked to Telling's Tinno transactions, it added. The trust company gained around CNY27.2 million (USD4.2 million) via the transfers, according to Telling's equity prices.

The new addition to Telling's portfolio got famous before the deal was finalized. Yicai Global reported exclusively on Sept. 12 that Telling and Tinno have been in contact with each other. The distributor has been talking with Tinno about smartphones to gain the latter's advantages in fifth-generation chips, Yicai Global learned.

On Sept. 12, Telling had said that it will acquire a mobile phone brand with its partners. Soon enough, market players were speculating whether the firm was planning to increase its investment in budget-brand Honor, which Huawei Technologies sold to a government-backed consortium in November 2020, or an overseas smartphone brand.

Telling already has links with Honor. The former paid CNY500 million (USD77.7 million) for a stake in the consortium that bought out the lower-priced brand that Shenzhen-based Huawei first introduced in 2013.

Telling has been seeking new business growth points in the upstream industry chain via mergers and acquisitions, it said yesterday. Investing in mobile phone brands will help the firm enhance its strategic partnerships with handset makers, it added.

Tinno reported around CNY6 billion (USD932.6 million) in revenue in the first half of this year, almost 87 percent of which comes from developing and selling mobile phones, according to its earnings report. China is its No. 1 sales market, making up nearly 27 percent of its revenue, followed by the US and France.

Editor: Emmi Laine, Xiao Yi