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Marlboro’s Move Into China May Boost Philip Morris International – January 30, 2008: 05:04 PM EST

NEW YORK -(Dow Jones)- Philip Morris International, Altria Group Inc.’s (MO) soon-to-be-independent international business, will begin manufacturing and selling its famous Marlboro brand in China later this year, a move that could eventually provide a big boost to the international tobacco company.

That move is part of a deal struck with the state-owned Chinese tobacco company a few years ago, and it’s taking off after lengthy discussions. China has an estimated 350 million smokers, and at the moment Marlboro isn’t manufactured in the country.

Altria Chief Executive Louis Camilleri said in a Wednesday conference call that Marlboro will be made and sold in China within the first six months of this year. The production of Marlboro in China, part of a deal that Altria cut in 2005 with the state-owned China National Tobacco Co., would not be subject to any quotas.

At present, Marlboro cigarettes are imported in limited quantities into China. As part of the deal with Chinese National Tobacco, Philip Morris International will also help sell some Chinese tobacco products internationally.

In China, Philip Morris International is going to have to grow from a small base against entrenched local brands, says Standard & Poor’s analyst Ken Shea.

“It’s going to be a good long-term move, but is unlikely to move the needle immediately,” he said.

Earlier Wednesday, Altria confirmed that it would spin off its Philip Morris International unit. While fast-growing emerging markets offer the Marlboro maker the potential for speedy growth, navigating these markets can be tricky due to local monopolies, regulations on foreign investment and the prevalence of alternative, regional tobacco products.

The spin-off would transform Altria into a domestic tobacco company from a global conglomerate. It would be left with Philip Morris USA and a 28.6% stake in brewer SABMiller PLC (SAB.JO).

-By Anjali Cordeiro; Dow Jones Newswires; 201-938-2408; anjali.cordeiro@

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