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1、CHINANETCOMBUSINESSPLANUPDATE December14 1999 Beijing TODAY SOBJECTIVES Reviewtheoverallanalysisofregulation competition andmarketdevelopmentDiscussthespecificimplicationsforCNCstrategyReviewthespecificdraftbusinessmodelsforCNCHowwemightattackthebusiness carrier andIDD DLDmarketsWhatkeytrade offswen
2、eedtomakeWhatarethekeysuccessfactorsandassumptions Discusstheinitialeconomicsofthesebusinessmodels andofCNCoverallDiscussthespecificnextstepsintwokeyareas HowtofinalizeandendorsetheoverallCNCbusinessmodelHowtomoveforwardwiththerefinedfinancials organizationdesign andtheplanforimplementation CONTENT
3、KeystrategicprinciplesRegulatoryoverviewMarketoverviewCompetitionoverviewBusinessmodelsNextsteps KEYCNCSTRATEGICPRINCIPLES TheobjectiveoftheseprinciplesistoprovidefurtherclarityinthedevelopmentandevaluationoftheCNCbusinessmodelThesewillberevisitedandrefinedastheprojectprogressesOurdevelopmentofbusin
4、essmodelswillseektobealignedwiththeprinciplesStrategicprinciplesandkeyassumptionswillbeconsideredinthefollowingaspectsCNCshareholdersBackbonebusinessLocalaccessbusinessInternationalgatewaybusinessRegulatorystrategyCompetitivestrategyMarketingstrategy CNCSHAREHOLDERS Principles Leverageshareholders c
5、oncertedvisionincreatinganewgenerationIPbroadbandcommunicationinfrastructureandaprofitable successfulcompanyLeverageshareholders existingbackboneassets localaccessassets researchcapabilitiesandlocalgovernmentrelationshipstosecuretime to marketandcreatecompetitiveadvantageSetamodelofanewtypeof SOE as
6、efficientasthebestoftheFIE privatecompanies beatshareholders expectationsbydeliveringhighreturnAssumptions CAS stronginterestinseeingCNCsuccessfulandprofitablequickly standsreadyforfavorableregulatoryinfluenceandresearchsupport wantsopportunitiesfornetworkingRhowtohandle BACKBONEBUSINESS Principles
7、Targetadvancedbackboneamong15keycitiesinEasternChina startwith2coresfromshareholdersbutquicklybuildownnetworkUsebackboneforavarietyofwholesaleandretailvoiceanddataservicesMaintaintheleadingedgeIP packetnetwork bothfortechnologicalsuperiorityandtofulfillshareholdermissionMaintainthebestcostposition u
8、singROWs purchasingclout righttechnologyBuildreservecapacity conduittodeterothersAssumptions ThecostsofconstructionandROWwillbethemajorityofnewnetworkcostsvirtuallyallofthenetworkwilluseMORorSARFTrightofwayNetworkwillbeIPorpacketinnatureDeploymentplanwillkeepcostslow buildoutquickly andcreategoodpos
9、itionlaylargenumberofconduitsinonetimelaterfill lightup andcolorfiberstrandsleaseoutconduit fiber bandwidthtomaximizereturn utilization LOCALACCESSBUSINESS Principles Beveryfocusedinlocaldeployment targetingprioritybusinessareasonlyEmphasizebroadbandtothecustomer usingFTTBandLMDSwherelogicalSeekstro
10、nglocalmarketshare especiallyinnewdataservicesgrowthareasDifferentiatefromChinaTelecombysuperiorservices quality responsivenessBuildstronglocalteamtoenablefastserviceresponseEmphasize endtoend networkownershipandmanagementAssumptions SH BJ GZ andSZbusinessdistrictsastargetsfortheneartermTheseaccount
11、forthevastmajorityofbusinesstelecomdemandNeedtosetspecificestimatesfortimingandsequenceofdeploymentAssumethatCNCwillhaveaccesstokeycityROW suchassubwaysystemsWillneedspecificassumptionsabouttheeaseandcostofhookingupbuildingsAssumethatprimaryemphasiswillbeonFTTB butthatLMDScanplayanimportantrole espe
12、ciallyininitialdeploymentandinsecondarycitiesWillneedspecificassumptionsabouttimingofaddingsecondarycities INTERNATIONALGATEWAYBUSINESS Principles CNCwillbeoneoffewplayerswithafullinternationallicenseVitaltoenableCNCtoprovideend to endservices globaldataservices andhighermarginIDDserviceHKgatewaylin
13、kmaybestrategicallyimportantAssumptions HKasoneofthekeylocationforinternationalconnectionamajortrafficdestinationamajorrelaylocationInternationalvoiceremainshighlyprofitablesegmentinmediumtermfutureExpecthighgrowthtogetherwithsteeppricedropininternationalservicesActivelyplanaheadforjoininginternatio
14、nalsub oceaniccableconsortium REGULATORYSTRATEGY Principles Mustactivelylobbyforfavorableregulatorydecisions togetherwithshareholdersprovideregulatorswithinternationalbenchmarkingforbestpracticesalignCNCobjectiveswithfaircompetition andpublicinterestshaveeffectiveseniormanagementfocusonlobbyingissue
15、sBecarefulaboutcommittinginvestmentifregulatoryissuestoouncertainEnsureCNCstrategyaddressesnationaleconomicdevelopmentprioritiesPaycarefulattentiontomanagingrelationswithChinaTelecomExpectedWTOin2000willimplygreateropeningofthemarketinthefutureAssumptions Atleasta2 3yearwindowwhenCNCcancontinuetoenj
16、oyfavorablepolicytreatment whilealsoworkingtostraightenoutregulatoryissuesatlocallevelManykeyregulationsremainingreyareas whereCNCcanplayaroleinshapingthepolicyWillneedtomakespecificassumptionsonanumberofregulatoryissues anddevelopseveralscenariosAssumethatCTandUnicomaretheonlyfullservicecompetitors butseveralnicheplayersWTOwillintroduceFDIintoChina stelecommarketby2002 butinfrastructureplayremaintightlycontrolled stilllimitedcompetition until2004 5maybeopportunityforsomeformofpartnershipwithfor
