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1、CONFIDENTIALChinas Mobile Telecom ServicesIndustry OverviewGCOPracticeDevelopmentMay2002ThisreportissolelyfortheuseofFirmpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionwithoutpriorwrittenapprovalfromMcKinsey&Company.ACKNOWLEDGEMENTS AND REFERENCESMGMs and CSS involved in the r
2、elevant studies include the following:TonyPerkins(BEI)StefanAlbrecht(BEI)ChipperBoulas(HKO)PeterKenevan(TOK)PerchowJosephChang(SHA)AndrewWu(HKO)HaiWu(BEI)JaneXing(HK)YiFeng(BEI)ShengFLi(SHA)YoshinobuTakanuki(TOK)GraemeHunter(JOH)JuliaYang(BEI)EricXu(BEI)JasonLiu(BEI)ShirleyChen(BEI)The series of PDs
3、 include the following:#ChinaMacroeconomicEnvironment#ChinasMobileTelecomServiceIndustryOverview#ChinasInternetIndustryOverview#ChinaTelecomEquipmentandServicesOverview#ChinasMobileHandsetSectorOverview#ChinaTelecomIndustryRegulatoryOverview#KeySuccessFactorsandCaseStudiesofMNCsEntrytoChina102PDChin
4、aMobileTelecomsServiceIndustry020403.pptKEY MESSAGES1.Chinasmobiletelecomservicemarketishugeandfastgrowing,representingUS$21billionmarketsizein2001andUS$38billionin2005.Thismarketissupportedbytheworldslargestsubscriberbaseat145million,alreadycomprising15%oftheworldstotalin2001andgrowingtopotentially
5、218millioninalowcaseor300millioninahighcaseby20052.ThecompetitivelandscapeformobileserviceshasevolvedfromasingleregulatorandoperatortotodaysduopolyofChinaUnicomandChinaMobile,bothofwhomareunassociatedwiththeMinistryofInformationIndustries.AsecondbreakupofChinaTelecomisexpectedtoformtwolargetelecomop
6、erators,ChinaTelecomandChinaNetcomGroup,whoarelikelytoreceivemobilelicenses.Afifthtelecomoperator,ChinaRailcom,alsohasthepotentialofreceivingathirdgenerationlicenseandbuildingamobilebusiness.Fornow,ChinaMobiledominatesthemarketwith82%valueshareand72%subscribershareandownsmuchofthehighvalueuserbase.H
7、oweverchurnisalreadyhighandisexpectedtoincreasewithcontinuingpricingpressuresandincreasedcompetition.3.WirelessdataservicesareexpectedtogrowquicklyinChinatoamarketofpotentiallyoverUS$4billionby2005,usedby43%ofallmobileusers.Interestfromconsumersurveyshavebeenhighandoperatorsandotherplayersareactivel
8、ybuildingservicesinthemarket.WhileearlyWAPserviceshavefailedtocatchon,SMShasgrownexponentiallywithupto20billionSMSmessagesin2001.Theearlyadopterswillbemobileprofessionalsandmodernyouth,whowillrequireservicesanddevicestailoredtotheirneeds.4.Regulatorychangesloom,particularlywiththeaccessionofChinatot
9、heWTO.WhileforeignerswillbeunlikelytosetupMVNOs,WTOwillallowgreaterparticipationofforeignersinbasicandvalueaddedservices,althoughgeographiclimitationswillexistthrough2004andChineseplayerswillberequiredtoownatleast50%oftelecomserviceventures(51%forbasicservices).Regulatoryrisksremain,withnomeanstoapp
10、ealregulatordecisions,unclearinterpretationofregulationincludingWTOcommitments,andthegovernmentstrackrecordofintransparentandunpredictabledecisionmaking.(SeeseparateregulatoryPDfordetails)AppendixPlayersprofiles3Gtechnologystandardschoices202PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES
11、1. Chinas mobile telecom service market is huge and fast growing, representing US$21 billion market size in 2001 and US$38 billion in 2005. This market is supported by the worlds largest subscriber base at 145 million, already comprising 15% of the worlds total in 2001 and growing to potentially 218
12、 million in a low case or 300 million in a high case by 2005302PDChinaMobileTelecomsServiceIndustry020403.ppt1997-2001 MOBILE SERVICE REVENUE GROWTH OF 30% CAGR HAS OUTPACED OTHER TELECOM SERVICE SECTORS AND IS PROJECTED AT 16% THROUGH 2005RevenuesUS$BillionsCAGR vs. other industries (1997-2001)Perc
13、entMobileFixedlinePagingCAGR30%CAGR16%Source:DeutscheBank;McKinseyanalysis402PDChinaMobileTelecomsServiceIndustry020403.ppt* RevenuesdonotequaltheproductofARPUassubscriberfiguresareprovidedforyearend,notaveragesubscribersduringayear.Detailedinformationonthetimingofnewsubscriptionsandchurnrequiredfor
14、thecalculationofaveragesubscribersduringagivenyearisnotavailable*AllCAGRsarecalculatedontheannounceddataSource:DeutscheBank;JPMorgan;MIIEXTRAORDINARY SUBSCRIBER GROWTH IS THE PRIMARY DRIVER OF REVENUE EVOLUTION, MORE THAN MAKING UP FOR LARGE DECLINES IN ARPU DUE TO STIFF COMPETITIONMobile revenues*
15、$BillionsNumber of subscribers low case MillionsCAGR 30%CAGR 16%CAGR 83%ARPUUS$/monthCAGR -24%CAGR -7%PenetrationinitiallylowGovernmentbackingforincreasingsubscribernumbersRelativelylowfixedlinepenetrationLow-endprepaidsubscriberincreaseDrivers Declineduetoincreasedprepaidandlowerspendingbylateentra
16、ntsTariffreductionascompetitionincreasesSlightlyoff-setbyincreaseindatatrafficinlateryearsCAGR 19%20823526329117161515AnnouncedEffective502PDChinaMobileTelecomsServiceIndustry020403.ppt*05forecastuselowcase,netsubsafterinactiveandmulti-sim-cardreduction*MajorEuropeancountriesinclude:UK,France,Italy,
17、Germany,Netherlands,Spain,SwedenSource: JPMorgan;WEFA-WMM;MII;McKinseyanalysisJapanCHINA IS THE WORLDS LARGEST MARKET IN TERMS OF SUBSCRIBERS, HAVING OVERTAKEN THE US IN 2001USMajorEuropean*countriesCAGR = 30%CAGR = 14%CAGR = 7%Number of mobile subscribersMillionsCAGR = 13%20002005Chinalowcase*China
18、highcase*CAGR = 22%602PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE SUBSCRIBER BASE IS GROWING MORE RAPIDLY THAN ANY OTHER MAJOR MARKET, COMPRISING 15% OF WORLD TOTAL IN 2001* Afirca,EasternEurope,MiddleEast,Canada* Forecastof02-05usethehighcase,netsubsafterinactiveandmulti -sim-cardre
19、ductionSource: JPMorgan;Gartner2001;DeutscheBank;MerrillLynch;PiperJaffray19971998199920002001E2073004827279651,1781,3931,633100%=Global mobile subscribersMillionsubscribers;percentWesternEuropeUSSouthandLatinJapanandAsiaPacificChina*Restofworld*CAGR1997-2005percent2918452847452002E 2003E 2004E 2005
20、E1,850702PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE MARKET IS PROJECTED TO GROW SIGNIFICANTLY*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreductionSource: IDCreport;JPMorganreport;McKinseyanalysisNet subscriber* additionsMillions199719981999200020012002E2003E2004E2005E10847
21、133-98-4711Annual growth Percent1237912131516PenetrationPercent47.143.946.345.75.511.516.939.435.9LowcaseHighcaseLow10847103-9225-13HighLowHigh1237912161923802PDChinaMobileTelecomsServiceIndustry020403.ppt0%5%10%15%20%25%CHINAS SUBSCRIBER BASE OF 218 MILLION IMPLIES A 47% PENETRATION OF AN ADDRESSAB
22、LE MARKET OF 460 MILLION BY 2005*Lowcase,netsubsafterinactiveandmulti-sim-cardreductionSource: JPMorgan;DRI;A;Literaturesearch;Analystreports;TeamanalysisIncome per capita(US$p.a.)2001AddressablemarketNumberofmobilesubscribersImpliedpenetrationoftheaddressablemarket2005E345mn145mn42%463mn218mn*47%Ch
23、ina income distribution and addressable marketPercent1,8151,77220012005Chinasaddressablepopulationformobileservicesisprojectedtoincreaseby8%p.a.forthenextfiveyearsto460millionin2005Thekeyassumptionsindeterminingtheincomethresholdare:Chineseconsumerswillingtospend5-10%oftheirincomeoncommunicationserv
24、iceshigherthantheaverageof3.5-4%formoredevelopedmarketsasagreaterportionofincomeisavailablefornon-essentialgoodsasaresultofChinasrelativelylowlivingcostHalfofthisassumedspentonmobileservices(5.5%)UnicomsprepaidARPUwilldecreasefromUSD8.3for2001toUSD8.1for2005;thereforethethresholdincomewilldropfromUS
25、D1,815(8.3*12/5.5%)for2001toUSD1,772for2005(8.1*12/5.5%)2005Addressablemarket:35%Addressablepopulation:460mnpersons2001 Addressablemarket:27%Addressablepopulation:345mnpersonsPercent of population902PDChinaMobileTelecomsServiceIndustry020403.pptMOBILE SUBSCRIBER PENETRATION OF LESS THAN 7% IN 2000,
26、LEAVES SIGNIFICANT ROOM FOR GROWTHSource: JPMorgan;IDCreport;Gartner;Literaturesearch,EIU100%199619971998199920002001E 2002E 2003E2004E 2005EMobile subscriber penetration in 2000PercentItalySwedenNetherlandsUKSpainGermanyFranceUSChina*AllsubscribersDataservicesubscribers1,2181,2301,2421,2541,2651,27
27、61,2871,2981,3091,319As percentage of total population low case*Millions(totalpopulation)ChinaUrban*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreduction*Penetrationovertotalpopulation*Penetrationoverurbanpopulation.0.61.01.92.96.68.91.12.03.97.10.412.013.415.016.41002PDChinaMobileTelecomsS
28、erviceIndustry020403.pptCHINAS RICHER PROVINCES GENERALLY HAVE MORE SUSCRIBERS AND ARE GREATER PENETRATEDPopulationMillionsPenetrationPercent,2000Subscriber CAGRPercent,1998-2000Number of subscribersMillionsProvinceGuangdongLiaoningZhejiangJiangsuShandongFujianHeilongjiangShanghaiHebeiSichuanBeijing
29、HenanAnhuiHubeiHunanSource: ChinaStatisticalyearbook,JPMorganReport,McKinseyanalysis1102PDChinaMobileTelecomsServiceIndustry020403.pptWHILE THE POOR WESTERN AND INTERIOR PROVINCES HAVE LESS SUBSCRIBERS AND ARE LESS PENETRATED* Growthratefrom1999-2000Source: ChinaStatisticalyearbook,JPMorganReport,Mc
30、KinseyanalysisPopulationMillionsPenetrationPercent,2000Subscriber CAGRPercent,1998-2000Number of subscribersMillionsProvinceJilinGuangxiYunnanShaanxiChongqingShanxiTianjinInnerMongoliaJiangxiGansuXinjiangHainanNingxiaQinghaiTibetGuizhou1202PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESSAGES2.
31、The competitive landscape for mobile services has evolved from a single regulator and operator to todays duopoly of China Unicom and China Mobile, both of whom are unassociated with the Ministry of Information Industries. A second breakup of China Telecom is expected to form two large telecom operat
32、ors, China Telecom and China Netcom Group, who are likely to receive mobile licenses. A fifth telecom operator, China Railcom, also has the potential of receiving a third generation license and building a mobile business. For now, China Mobile dominates the market with 82% value share and 72% subscr
33、iber share and owns much of the high value user base. However churn is already high and is expected to increase with continuing pricing pressures and increased competition.1302PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS MOBILE OPERATOR LANDSCAPE HAS EVOLVED SIGNIFICANTLY, CULMINATING IN SEC
34、OND BREAKUP OF CHINA TELECOMNomobilelicensescurrentlySource: Literaturesearch;EIUPyramid;IndustryreportsChinaTelecomChinaUnicomBecamethesecondmobilenetworkoperatorinmid1994However,ChinaTelecomasthesoleproviderofbothbasicandwirelesstelephonyservicesmadeitdifficultforUnicomtogrowChinaUnicomChinaRailco
35、mChinaUnicomMinistryofPostsandTelecommunicationsCreatedin1994whenformerMPTseparatedintoregulatoryandoperatingfunctionsChinaTelecomownershiptransferredtoMinistryofFinance,withregulatoryfunctionsplacedinthenewMinistryofInformationIndustries(MII)ChinaTelecomChinaMobile(CMCC)ChinaTelecomChinaMobile(CMCC
36、)Underthegovernmentsanti-monopolyplan,inthe1sthalfof1999,ChinaTelecomwassplitinto4operatingcompanies:CTfixed,ChinaMobile,CTPaging,CTSatelliteThechangebecameofficialonApril20,2000Priorto1994,theMPTactedastheregulatorandsoleoperatoroftelecommunicationsIn1993,announcementwasmadetoseparateoperatingandre
37、gulatoryfunctionsalongwiththeestablishmentofa2ndoperatorGreatWallEstablishedin1995toharnessPLAsradiospectrumThecompanyundertakes“theCDMAproject”atthedirectionofthegovernmentGreatWallDuetogovernmentcommitmenttoseparatePLAfromcommercialactivities,GreatWalldissolvedwithdecisiontotransferCDMAassetstoChi
38、naUnicommadeinOctober2000(transferyettobecompleted)2ndlargestfixedlinenetworkEstablishedDecember2000OfferslimitedGSMserviceoveritsrailwaynetworkPre 1994 Regulator and Operator1994 to 1999Virtual Monopoly1999 To 2002 Deregulation/Breakup2002 and beyond 2nd breakupand future landscapeChinaNetcomEstabl
39、ishedinSept.1999withinternetbackboneLikelylicensewinnerJitongJitongSetupin1994todevelopdatacommunicationserviceBegantoofferVoIPservicesLeadingplayerinvoiceoverIPChinaNetcomGroupChinaRailcomChinaTelecombrokenupintoNorthandSouthwithCTNorthmergingwithChinaNetcomandJitongtobecomeChinaNetcomGroupChinaTel
40、ecomSouthcontinuesoperationasChinaTelecomOperatingCDMAlocalloopservicesinseveralcitiesChinaMobileunaffectedbysecondbreakup,survivingproposaltomergeitwithJitong,givenconcernsaboutconsequencesofforcedmergersforpubliclylistedcompaniesChinaUnicomunaffectedbysecondbreakup,survivingproposaltomergeitwithRa
41、ilcomWhileGreatWallCDMAassettransferhasyettobecompleted,UnicomwillbecomefirstmajoroperatorintheworldwithbothCDMAandGSMservices,withlaunchofitsownCDMAnetworkin2002Operatorbiddingfor3Glicense,withopennesstowardsadoptingChinas3Gstandard,TD-SCDMA1402PDChinaMobileTelecomsServiceIndustry020403.pptSource:
42、Literaturesearch;industryinterviewsBeforeAfter CT break-upMOST RECENT BREAK-UP OF CHINA TELECOM TO LEAD TO A LANDSCAPE OF 5 OPERATORS COMPETING ACROSS BOTH MOBILE AND FIXEDLicensesLicensesAnnouncementonNovember26tomergeJitongwithChinaNetcomandChinaTelecomNorthernunitCompetitionwillincreaseasmergedte
43、lecomgiantsobtainlicensesforcomprehensivetelecomoperations,includingFixed-linephoneMobilephoneInternet-relatedservicesOriginalplantomergeChinaMobilewithJitongandChinaUnicomwithChinaRailcom,metwithstrongdissentfromthecapitalmarketswhosawthisasanaffronttoChinaMobileandChinaUnicomsgovernanceaspubliclyh
44、eldcompaniesMobileMobileFixedMobile(GSM-R)FixedFixedFixedFixedGROUPChina Telecom NorthChina Telecom SouthMobileFixedMobileFixedMobileFixedMobileFixedChina RailcomChina RailcomMobileFixedHavelicense1502PDChinaMobileTelecomsServiceIndustry020403.pptPROFILES OF CURRENT AND LIKELY FUTURE PLAYERSChina as
45、setsMobile strategyCurrent partnershipsLicense prospects*Stilltobedecided96millionmobilesubscribers30millionmobilesubscribersServicescoveringover180citiesLargestnationaltelecomnetworkcovering2,000citiesFirstoperatortointroduceinternetaccesscards,andannouncedon-lineshoppingcardtobelaunchedin2001Inter
46、netbackbonecovering17majorcitiesStartedIPphoneservicesinJanuary20002ndlargestnetworkinChina;coveringallmajorcities(500cities)Betechnologyleader,thuseagertoenter3GFocusonhigh-endcustomersTrialingGPRSwith7vendorsStronglysupportingWAPShiftingattitudesontechnology,nowfirstplayertocoverbothGSMandCDMAFocu
47、singattentionondevelopingCDMAnetworksTrialingGPRSwith4vendorsCompeteonserviceofferingwithexistingoperators,leveraginggovernmentandsupplierexpertiseActivewithWLLandlocalmobilityGostraightto3GifpossibleObtainmobilelicenseasquickaspossibleregardlessoftechnologystandardRolloutwirelessdataservicesevenifi
48、tmeanstakingGSM/GPRSfirstMayfocusinitiallyonGZ,BJ,SHLikelyintendsfollowing2-tierstructureObtain3Glicensetotargethigh-endusersUse2GPHStotargetvoicesubscribersVodafoneHPHutchisonKDDISKTelecomTelstraAT&TJapanTelecomBritishTelecomNewsCorporationGoldmanSachsSingTelNoneExistingExistingCurrent playersChina
49、 MobileChina UnicomLikely future playersChina TelecomChina NetcomChina Railcom* Governmentlikelytogrant2licenses;undecidedwhen,andwhattype;nonetobeawardedin2001Source: PiperJaffrey;MerrillLynch;Literaturesearch1602PDChinaMobileTelecomsServiceIndustry020403.pptOTHER PLAYERS UNLIKELY TO ATTAIN MOBILE
50、LICENSESSource: GoldmanSachs;EIUPyramid;McKinseyanalysisCentury MobileJitongForeign JV EntrantsNew telcosWho they areBasis for entryObstaclesConsortiumof10enterpriseswhohavejoinedtogethertotrytosetupmobileenterpriseSetupin1994todevelopdatacommunicationservicesPotentialJVsinvolvingforeigncompaniesNew
51、playersexpandingintotelecomSomegovernmentcontactsOriginallyconsideredtakeoverofGreatWallsassetsOwns70%ofVoIPmarketGovernmenthasindicateddesiretoseemultipleoperationswithmultipleserviceofferingsGovernmentmaybepressuredtoshowmarketprogressandWTObenefitsForeignoperatorsandentitieseagertoinvestDesiretoe
52、nterwirelessgivenopportunitiesandconvergenceoftechnologiesGreatWallassetsmovedtoChinaUnicomNocurrentdiscussionregardingmobileservicesobservedLowcapabilitytoutilizemobilespectrumifallocatedWTOagreementsdonotrequirethatnewtelecomlicensesbeissuedtonewentrantsNationwidepresenceofforeigninvestmentnotposs
53、ibleforinitial3yearsunderWTOMIIwilllikelylimittheinfluenceofotherministriesontheirturf(e.g.,blockingSARFTentryintoInternet)1702PDChinaMobileTelecomsServiceIndustry020403.pptEXISTING AND POTENTIAL MOBILE OPERATORS HOLD BROAD BUT DIFFERENT COMPETITIVE POSITIONINGS AND SERVICE OFFERINGSBasic services C
54、hina MobileChina Unicom China TelecomChina Netcom MobilevoiceserviceMobiledataserviceIPMultimediaserviceMobilevoiceserviceMobiledataserviceIPMultimediaserviceLocalcallDLDIDDPagingIPMultimediaserviceLocalcallDLDIDDWebhostingNetworkelementleaseandsaleIPIDDWebhostingLeaseandsaleofbandwidthValue-added s
55、ervices FaxVoicemailCallerIDCallwaitingSMSVPN/VPDNIDCFaxVoicemailCallerIDCallwaitingSMSVPNFaxVoiceVASCallerIDVPNIDCISDN/DDNEDIISPE-mailDatacommunicationPublicmultimediaservicesSource: MII;Asiacom;Analystreport1802PDChinaMobileTelecomsServiceIndustry020403.pptEACH EXISTING/POTENTIAL MOBILE OPERATOR H
56、AS STRENGTHS AND WEAKNESSESSource: LiteratureResearch;McKinseyAnalysis;IDCChinaMobileChinaUnicomChinaNetcomChinaTelecomChinaRailcomStrengthsWeaknessesIncumbentoperatorservinghighervaluecustomersDominatesmarketwith74%ofsubscribersand84%ofrevenuesAlliedwithVodafonewhoseCEOsitsonboardAccesstoglobalcapi
57、talviaCMHKOfferscompletepackagetocorporatecustomersAbletounderpriceCMandattainmarketshareGovernmentandpolicysupporttopromotecompetitionNofrequencyconstraintduetoCDMAnetwork(13msubcapacity)AccesstoglobalcapitalviaUnicomHongKongStrongmanagementteamwithexecutiveshailingfromsuccessfulstartup(Asia-info),
58、consultingfirmsandbulgebracketinvestmentbanksStronggovernmentalconnectionswithJiangZeminssononboardRemainsdominantfixed-lineoperatorDominantindatacommunicationsandinInternetservice2ndlargestfixed-linenetworkFacing2Gspectrumshortageinmajorcities2002/2003Unicomhas10%priceadvantagebyregulationManagemen
59、tandbusinessstructurenotyetcompletelysetupWeakerbrandandpublicpenetrationthanCMHKFacingcomplexityofdualnetworkmanagementInfrastructurespendhightobuildCDMAnetworkLacksfixed-networkreachHasnomobileoperatinglicenseLacksmobileexpertiseRegulatoryconcernsasMIIlawprohibitingJVswithSOEstargetsrelationshipwi
60、thSARFT(oneofthefounders)HasnomobileoperatinglicenseLacksmobileexpertiseCarriesmonopolycultureandlacksbusiness-drivenaggressivenessBoundtofinanciallynonviableruralareaexpansionoffixed-linenetworkUncertaintiesinitsbreak-upplanHasnomobileoperatinglicenseLacksmobileexpertiseLacksscaleandsupportExisting
61、/potential operator1902PDChinaMobileTelecomsServiceIndustry020403.pptMOST OPERATORS HAVE EXISTING PARTNERSHIPS WITH FOREIGN PLAYERS* ChinaRailcomisinvolvedinnorelevantpartnershipsSource:LiteratureResearch;AnalystreportsChinaMobileChinaUnicomChinaTelecomChinaNetcomPartnerType of partnership VodafoneH
62、PHutchisonTelecomKDDISKTelecomTelstraAT&TJapanTelecomBritishTelecomNewsCorporation,GoldmanSachs,etc.SingTelEquantVodafoneowns2%equityshareinChinaMobile(HK)StrategicallianceagreementwithVodafonetobeCMHKslongtermpreferredpartnerinareasincludingR&Dtechnicalexpertise,standardandprotocoldevelopmentetc.Wi
63、relessdataR&DJVbetweenmajorityownedsubsidiaryAspireandHPHutchisonowns1.5%ofChinaUnicom(listed)JointdevelopmentoftechnologyforhighspeedmobilephoneKDDItosupplyCDMAOnemobilephonesStrategicAlliancetoaidChinaUnicomsCDMAOnenetworkdevelopmentand3GtransitionStrategicalliancetoaidUnicomdevelopCDMAnetworkAT&T
64、owns25%ofShanghaiSymphonyTelecommunicationsMOUinfixedline,mobilephoneandfast-datatransmissionareasforclientcompaniesMOUsignedin1998tocooperateintechnologyandbusinessopportunitiesJointventureprovidingend-to-enddatacommunicationserviceforMNCssetupin1999Partnersbought12%ofChinaNetcomfor$324millioninpri
65、vateplacementStrategicalliancetoprovidesafe,efficientdatatransmissionforSingaporecompanieswithsubsidiaries,partnersinChinaServiceagreementtoco-developVPNofferingsOperator*2002PDChinaMobileTelecomsServiceIndustry020403.pptIN MOBILE TELECOM SERVICE MARKET, CHINA MOBILE WILL LIKELY REMAIN THE DOMINANT
66、OPERATOR IN BOTH REVENUE 100%=1998199920002001E2002E2004EChinaUnicomChinaMobile2003E2005E363710Otheroperators000008.411.816.221.127.932.034.538.4US$Billions,percentCAGR 1998-2005EPercent6718N/ASource: McKinseyAnalysis2102PDChinaMobileTelecomsServiceIndustry020403.pptAND SUBSCRIBER* SHARE1997ChinaUni
67、comChinaMobile3100%=5112543851451551761972181998199920002001E2002E2003E2004E2005EOtheroperator(s)Millions,percent*02-05forecastarenetsubsafterinactiveandmulti-sim-cardreductionSource: DeutscheBank;JPMorgan;McKinseyanalysis2202PDChinaMobileTelecomsServiceIndustry020403.ppt*02-05forecastarenetsubsafte
68、rinactiveandmulti-sim-cardreduction*AcquiredbyCMHKfromparentinOct2000Source: JPMorgan;Industryinterviews;McKinseyanalysisPROPORTION OF EACH OPERATORS SUBSCRIBERS* INCLUDED IN LISTED ENTITYMillions,percentChina Mobile23.537.866.3111.0108.4 112.9118.7126.6199819992000 2001E 2002E 2003E 2004E 2005E6661
69、68656666CMHK100%=Unicom1.55.218.744.047.055.263.567.81998199920002001E 2002E 2003E 2004E 2005E626365616162UnicomListed100%=8682CMHK ProvincesBeijing*FujianGuangdongGuangxi*HainanHebei*HenanJiangsuLiaoning*Shandong*Shanghai*Tianjin*ZhejiangUnicom (HK) ProvincesAnhuiBeijingFujianGuangdongHebeiHubeiJia
70、ngsuLiaoningShandongShanghaiTianjinZhejiang4128Listedcompany2302PDChinaMobileTelecomsServiceIndustry020403.pptCHURN IS ALREADY SIGNIFICANT WITH BOTH OPERATORS AND WILL CONTINUE TO INCREASE DRIVEN BY INCREASING COMPETITION WITH IMPACT GREATEST ON CHINA MOBILEPercentChinaMobileHKChinaUnicomCommentsChi
71、naMobilesbroadernetworkcoverageleadsinitiallytofarlowerchurnratethanforChinaUnicomChinaUnicomsrapidlyexpandingnetworkandhigher-qualityCDMAconnectionwillincreaseCMHKschurngoingforwardIntensifyingcompetitioncausesbothsetsofchurnratestoriseAsnetworksbecomesimilar,customersappreciatelowerChinaUnicompric
72、eSource: Analystreport;Companyannualreport2402PDChinaMobileTelecomsServiceIndustry020403.pptCommentsDecreasingtrendduetoIncreasedcompetitionandlowertariffsIncreasedmixoflow-valueprepaidusersDeepeningpenetrationwhichincreaseslow-valueusershipChinaMobilesARPUhigherduetoHigherpricesthanChinaUnicomGreat
73、erconcentrationofhigh-endusersbecauseofbreadthofcoverageandmarketpresenceCHINA MOBILE ENJOYS GREATER ARPU, ALTHOUGH LISTED COMPANIES FOR BOTH OPERATORS GENERATE GREATER ARPU THAN UNLISTEDCMHKUnicom(listed)CM(unlisted)Unicom(unlisted)US$/monthSource: DeutscheBank;McKinseyanalysis2502PDChinaMobileTele
74、comsServiceIndustry020403.ppt* 100%=75.9millionsubscribersin2001and111.9millionin2005* 100%=28.6millionsubscribersin2001and54.9millionin2005Source: GoldmanSachs;MorganStanley;Teamanalysis-6CHINA MOBILES ARPU EXCEEDS CHINA UNICOMS DESPITE A LARGER PROPORTION OF PREPAID CUSTOMERSBlended ARPUUS$/monthC
75、MHKChinaUnicom(listed)20012005CAGRPercent-5Prepaid vs. postpaid ARPU comparisonUSD/monthCAGRPercent-5200120050CMHKChinaUnicom(listed)-1-4Prepaid subscribers as percentage of total subscribersPercentCAGRPercent19*20012005CMHKChinaUnicom(listed)43*WAWAChinaMobilesARPUexceedsChinaUnicomsdespitealargerp
76、roportionofprepaidcustomersduetoafarhigherpostpaidARPUChinaMobileshigherpostpaidARPUisduetoitshigh-endcustomerbaseandsuperiormarketingaswellasChinaUnicomslowertariffschargedPrepaidPostpaidBlended2602PDChinaMobileTelecomsServiceIndustry020403.pptShare priceHK$SHARE PRICES FOR BOTH OPERATORS HAVE DETE
77、RIORATED IN 2001 PRIMARILY DUE TO PRICING PRESSURESCMHKChina UnicomChinaMobileannouncesnewlowertariffpackagesSharepricetookahitonfearsthattariffcutsandspendingonanewCDMAnetworkwilleatintoearningsMIIannouncescancellationofregistrationfeeMarket capitalizationUS$billions120.469.520.917.5Source: HongKon
78、gstockexchange;DataStream2702PDChinaMobileTelecomsServiceIndustry020403.pptNONETHELESS, BOTH OPERATORS STILL ENJOY HEALTHY EBITDA AND RETURN ON ASSETS, DRIVEN BY LOWER COST BASES, ESPECIALLY COMPARED TO CHINA TELECOMUS$Billions,2000Player* RevenuePercent of revenue Percent of revenue CMHKChinaUnicom
79、(listed)ChinaTelecomEBITDAN/ANet profitROAPercent0.154.744.8N/A18.813.80.5* TotalChinaMobilerevenue14.3billion* TotalChinaUnicom(Listed+unlisted)mobilerevenueisUS$1.9billion;listedportioncontributes1.5billion(balancepagingandfixedline)* NetcomandRailcomfinancialsN/ASource: JPMorgan2802PDChinaMobileT
80、elecomsServiceIndustry020403.pptKEY MESSAGES3. Wireless data services are expected to grow quickly in China to a market of potentially over US$4 billion by 2005, used by 43% of all mobile users. Interest from consumer surveys have been high and operators and other players are actively building servi
81、ces in the market. While early WAP services have failed to catch on, SMS has grown exponentially with up to 20 billion SMS messages estimated for 2001. The early adopters will be mobile professionals and modern youth, who will require services and devices tailored to their needs. 2902PDChinaMobileTe
82、lecomsServiceIndustry020403.pptRESULTS OF A CHINESE WIRELESS SURVEY (2000) INDICATED STRONG INTEREST IN MOBILE DATA SERVICES* InternetusernumberissignificantlyhigherthanInternetsubscriptionnumber,becauseofthesharingInternetaccessamongusersSource: Mobileusersurvey,2000VeryinterestedInterestedNotinter
83、estedNeutralVerydisinterestedKey sample characteristicsInterviewof100randomlychosenrespondentsinShanghai,BeijingandGuangzhou,representingagoodcross-sectionofdifferenttypesofmobileusers68%ofrespondentsexpressinterestinreceivingdataservices20%ofrespondentsarefixedlineinternetusers*MedianInternetusageo
84、f30hours/monthMedianmobilebillofRMB300/month3002PDChinaMobileTelecomsServiceIndustry020403.pptCONSUMERS HAVE GREATEST INTEREST IN EMAIL AND MOBILE VASSource:Mobileusersurvey,2000InterestedNeutralNotinterestedE-mailInter-netbrows-ingNews/sports/Enter-tain-mentStockquotesCitymapFlight/trainsche-dulean
85、dreser-vationYellowpagesPercentageofrespondentsInterest in content delivered over mobileForcontent,Chineseconsumersshowgreatestinterestinemail,flight/trainschedulingandreservation,andnewsFortransaction,mobileVASandm-bankingarethemostpopularm-commerceapplicationsforChineseconsumersMobileVAS(billing,l
86、ocation,etc.)MobilebankingInter-activegamesPercentageofrespondentsInterest in transactions delivered over mobile3102PDChinaMobileTelecomsServiceIndustry020403.pptCHINAS WIRELESS DATA SERVICES EXPECTED TO GROW QUICKLYSource: IDCreport;Literatureresearch;McKinseyanalysisESTIMATEVoiceonlyDataandvoiceNu
87、mber of mobile subscribersMillions,Percent4387145155-161176-207197-253218-30005E04E03E02E01E009943%26%15%9%4%Revenue from wireless dataUS$billions05E04E03E02E01E2.61713.33.02.7Wireless data service ARPU/month/actual user US$LowcaseHighcase5.42.51.10.40.1155CAGR3202PDChinaMobileTelecomsServiceIndustr
88、y020403.pptHANDSET AND PDA MANUFACTURERS WILL FURTHER DRIVE MOBILE DATASource:IDC;CCID;SINO-MR;Gartner;Interviews;CahnersIn-StatGroup;literaturesearch;TeamanalysisNumber of handset units soldMillions20002001E2002E2003E2004E2005E23%30%45%63%86%90%45.054.946.657.565.644.6Number of PDA units soldMillio
89、ns20002001E2002E2003E2004E2005E2%2%11%31%56%82%6.88.311.917.325.05.6Number of mobile device units soldMillions20002001E2002E2003E2004E2005E23%30%44%58%74%69%45.255.850.367.286.144.7CAGRCAGRNon-internetenabledInternetenabledOtherWireless24%14%7%2%0.3%0.3%InternetenabledhandsetWirelessPDA14%42%-28%42%
90、8%-28%CAGR193%35%-4%183%Non-dataenabled20012005Comparison of unit shipment in China vs. USMillionsChinaUS3302PDChinaMobileTelecomsServiceIndustry020403.pptNUMEROUS PLAYERS INVOLVED IN THE PRC WIRELESS DATA MARKETSource: LiteraturesearchLeadingPRCportalslaunchedWAPsiteSupportedbyequipmentvendorsandlo
91、caloperatorsPRC wire-lineportalsPlayersEstimated numberSummaryKey Player (examples)ActivelylaunchingWAP/GPRStrialsinHongKongAnnouncedinterestinPRCAcquiringstartupstostrengthencapabilityDevelopingrelationshipswithPRCOperatorsInternational m-portals/HK operatorsSmarTone/BTSoneraSKTelecomHutchisonNewWo
92、rldWAPsiteslaunchedM-commerceenableremergingandformingpartnershipwithcontentsuppliersor/andPRCoperatorsPRC wire-less portal platformsMonternet(ChinaMobile)Uni-info(ChinaUnicom)LaunchedWAPservice/portalswithsupportofpartnersGPRStrialsinprogressandscheduledforlaunchinOctober,2001ChinaUnicomlaunchedCDM
93、A(64kbps)and1XRITT(140kbps)inJan2002ChinaMobileinitiated3GtrialsinNovember,2001PRC mobileoperators10-205-102-52ChinaMobileChinaUnicomSCSEquipment Vendors3402PDChinaMobileTelecomsServiceIndustry020403.pptOPERATORS ARE ESPECIALLY ACTIVE IN PURSUING WIRELESS DATASource: Literaturesearch;Analystreports;
94、TeamanalysisOperators are actively pursuing wireless data servicesCompetitive pressureChinaMobilesdominationofthemarketisthreatenedbyUnicomsaggressivelowpriceandvalueaddedservicesofferings2newoperatorsmaybegrantedlicensestoenterwirelessmarketafter2002Theleverofcompetitioninmobilecommunicationmarketw
95、illbeVASHighvaluemobileusersexpresstheirwillingnesstoswitchoperatorsinordertoaccesswirelessdataservicesChinaMobileoffersWAPserviceinallcities,andhasgatewaysin4citiesUnicomalsolaunchedWAPservicein6majorcitiesBothChinaMobileandChinaUnicomareactivelyformingpartnershipswithmobileInternetapplicationprovi
96、dersandICPstoboostuptheirWAPofferingsPotentialnewoperators,ChinaTelecomandChinaNetcomalsoexpressstrongdesirestofocusonwirelessdataservicesasatooltogaincustomerbaseOperatorshaveintroducedownwirelessportalsMonternetbyChinaMobileUni-infobyChinaUnicom3502PDChinaMobileTelecomsServiceIndustry020403.pptWAP
97、 SERVICES HAVE FAILED TO TAKE OFF IN CHINASource: Literaturesearch;GartnerGroupWAP has failed to take offContentMainlyinformationalservicessuchasnews,weatherTextcontentSlow take off450,000subscribersin2000Lessthan300,000usersin2000Major roadblocks to successSlowspeed(download,processing)Limitedcompe
98、llingWAPcontentInitialpremiumpricingandlimitedavailabilityofWAPenabledhandsetsDifficultinputUnstableconnectionLimitedcoverageRelativehighmobileInternetchargeSmallscreenwithunclearChinesecharacterdisplaysHardtonavigateLackofsecurity3602PDChinaMobileTelecomsServiceIndustry020403.ppt.BUT SMS IS TAKING
99、CHINA BY STORMSource: Literaturesearch;TeamanalysisLesson learnedMobiledataservicesneedtobesimple,cheap,reliable,andfun20millionactiveuserscurrently19.9billionmessagessentin20012%ofCMCCrevenuein2000wasfromSMSAveragedailySMSvolumeinShanghaiis3millioninJuly2001ChinaMobileandChinaUnicomlinkingtheirSMSs
100、ervicesSMSenabledPDAslaunchedKey success factorsFunContentGetandsendtextmessagesPlaysimplegamesRealtimecontestDownloadringtonesDownloadscreensaversExchangejokesSMS is enjoying a fast take offLowusagecost0.10RMBpermessageReliableserviceProventechnologyImprovedandeasierinputNationwidecoveragebyCMCCand
101、nowbyUnicomtooNonewhandsetneeded3702PDChinaMobileTelecomsServiceIndustry020403.pptEARLY TAKE UP OF MOBILE DATA IS ENCOURAGING AS CONSUMERS ARE DEMONSTRATING WILLINGNESS TO PAYData service offeringsData service performanceBy operatorsChinaMobileProduct/serviceSMS,includingpersonalizedinformation,flig
102、ht/trainscheduleinquiry,stockquoteandonlinechattingWAP,includingemail,gamingandPIMPricingRMB0.1perordinarymessageforsendingwithfreeforreception;RMB0.2-2chargedbyserviceproviderandCMforeachspecializedSMSWAPpricing:RMB0.15perminuteforfirst200minutes,freeforanother300minutesandRMB0.15perminuteforanyext
103、raChinaUnicomProduct/serviceSMS,includingpersonalizedinformation,PIM,entertainmentandstockquoteOnlinepagerPricingRMB0.1perordinarymessageforsendingwithfreeforreception;samechargeforspecializedSMSasCMBy ICPSMobileQQ(WWW.TENCENT.COM)Product/serviceUnifiedinstantmessenger(mobileQQ)enablingmobiletoPCcom
104、municationPricing5RMBmonthlyfee+0.1RMBperoutgoingmessagewithfreeincomingmessagesviaCMmobileNomonthlyfee,but0.1RMBperoutgoingmessageand0.05RMBperincomingmessageviaCUmobileChina Mobile2001China Unicom 2001NumberofshortmessageSMSPenetrationinuserbase*Percentoftotalrevenue*15.9billion29%4billionN/A1.2%N
105、/ASource:Semi-annualreports;Pressrelease;Website;Interviews;Teamanalysis*IncludebothwirelessdataandVAS*onlyCMQQsubsincluded*CMHKNumberofshortmessageSMSPenetrationinuserbasePercentoftotalrevenue*QQ1sthalf2001TotalsubsMobileQQsubs20million0.9million*3802PDChinaMobileTelecomsServiceIndustry020403.ppt“V
106、IRTUAL PETS” IS ONE EXAMPLE OF SMS APPLICATION IN CHINASource: Linktonewebsite;literaturesearchLinktones“VirtualPets”SMSgameallowssubscriberstoeducatetheiranimalofchoice-rangingfromtigerstopigstothepopularkoala-senditondatesandputittobed,ratherliketheJapaneseelectronicpet,TamagotchiThecostisveryaffo
107、rdableatRMB0.10perSMSMoreBackMoreBack-2000-Lunar狼吞虎咽的把饭吃光了。谢谢主人，再来点吧。米增加5；金币减少10；经验增加1。Lunarhaseatenthefoodlikeatiger.“Thankyou,master.Somemore,please.”Use10goldcoinstobuy5riceunits,addoneexperiencepoint.MoreBack-2000-申请侍应生职位成功，由于工作努力，获得30个金币！经验增加3Yourpetwassuccessfullyhiredasawaiter.Becauseofhishar
108、dwork,hehasearned30goldcoins,andthreeexperiencepoints.MoreBack-2000-你的宠物魅力十足，cici想跟你做朋友（跟对方说话请输入P空格cici空格再写内容），30字以内。Someonehasacrushonyourpet!(Totalktothepignamedcici,enterP_cici_andanote)Donotexceed30characters.China, like Japan, combines a love of gadgets with a “cult of the cute”3902PDChinaMobil
109、eTelecomsServiceIndustry020403.pptQQ HAS BEEN VERY SUCCESSFUL IN GAINING SUBSCRIBER BASE WITH UNIFIED MESSENGINGMobileQQinasemi-instantmessagingtypeofmobiledataapplication,whichoriginatedfromthepopularinternetbasedinstantchattingandmessagingapplication,I.e.,OICQ,wheresubscriberscanchatwitheachothera
110、ndbenotifiediftheirfriendsareonlineatrealtimeBasic functions:SendingSMSbetweenmobilephoneandQQUsingmobilephonetocheckinformationstoredonQQUsingmobilephonetocheckiffriendsareon-lineService fee:ServicesarefreeforuserswhoonlyuseOICQontheInternetSubscribersarechargedforusingmobileQQviamobilephoneFeestru
111、ctureforChinamobilesubscribersis:5RMBmonthlyfee+0.1RMBperoutgoingmessage,incomingmessageisfreeofchange*FeestructureforUnicomsubscribersis:nomonthlyfee,but0.1RMBperoutgoingmessageand0.05RMBperincomingmessageTenCentclaimstohave20millionsubscribersintotalInfact,only0.9millionofwhichareactualmobileQQuse
112、rsfromwhomChinaMobilecollectsmonthlysubscriptionfeeforTenCent* Whilesubscribersdontneedtopayforincomingmessages,TenCentisrequiredtopay0.05RMBforeachincomingmessagetoChinaMobileSource: TenCent,teamanalysis4002PDChinaMobileTelecomsServiceIndustry020403.pptFOUR KEY MOBILE DATA USER SEGMENTS CAN BE IDEN
113、TIFIEDSource:Surveyresearchon18citiesand2500mobileusers;TeamanalysisMobile professionalsModern youthDescription Segment Conservative mainstreamIndifferent laggard MostlymanagersorentrepreneursUsemobilephonemainlyforbusinessTravelalotandhavesignificantroamingneedsCareaboutvoicequalityandnetworkcovera
114、geHighpersonalincomeHighmobiledatapotential:already25%ofthemuseSMSfrequentlyMostlyunder30yearsoldUsemobilephonemainlyforpersonalcommunicationconvenienceInterestedinnewtechnologiesandwillingtotryoutnewthingsManyunmarriedpeople,withhigheducationallevelHighmobiledatapotential:already47%useSMSregularlyC
115、arethemostofmobilecommunicationcostRelativelylowerincomeOlderthanaverageandlesseducatedLotsofpre-paidusersLowestARPUVerylowSMSusagecurrently:13%LittlepotentialformobiledataMostlymarried,over30yearsoldandundercollegeeducationDontcaremuchabouttechnologyandtrendMainlyusevoiceservicesforlocalcallsVerylo
116、wSMSusagecurrently:2,500usersforChinaMobileandroughestimatesforChinaUnicomSegmentShare of total revenuesPercentoftotalrevenueSMS usePercentPC internet usePercentMobile professionalsARPU USDShare of total subscribersPercentModern youthConservative mainstreamIndifferent laggard4713ESTIMATE4202PDChinaM
117、obileTelecomsServiceIndustry020403.pptBOTH TARGET SEGMENTS WILL REQUIRE DEVICES WITH FEATURES CUSTOMIZED TO THEIR NEEDSSource: TeamanalysisMobile professionalCustomer segmentMostlymanagersorentrepreneursUsemobilephonemainlyforbusinessTravelalotandhavesignificantroamingneedsCareaboutvoicequalityandne
118、tworkcoverageHighpersonalincomeHighmobiledatapotential:already25%ofthemuseSMSfrequentlyMostlyunder30yearsoldUsemobilephonemainlyforpersonalcommunicationconvenienceInterestedinnewtechnologiesandwillingtotryoutnewthingsManyunmarriedpeople,withhigheducationallevelHighmobiledatapotential:already47%useUM
119、SregularlyDescriptionMessaging/emailonthegoInformation(e.g.,stockquotes,weather,news,localguide)PersonalinformationmanagementMobilecommerceMobilestocktradingMobileofficeMessaging/emailInformation(localnews,weather,event)Games/entertainmentKey user needsAlwaysup-to-dateunifiedmessaging(hotmail,voicem
120、ail,2-waySMS,IM)CustomizedinformationAlwaysup-to-datePIM,notifications,alerts,outlooksync.CommerceandstocktradingcapabilitiesSecurebrowserofcorporateintranetandinternetAlwaysup-to-dateunifiedmessaging(hotmail,voicemail,IM,2-waysSMS)CustomizedinformationNetworkgamingDownloads(rigtone,basicimage,music
121、andvideoclips)throughPCPIM,PIP,notification,alerts,outlooksyncKey featuresModern youth4302PDChinaMobileTelecomsServiceIndustry020403.pptMESSAGING, INFORMATION AND ENTERTAINMENT WILL BE KEY OFFERINGS FOR MOBILE PROFESSIONALS AND MODERN YOUTH IN THE NEAR TERM%ofpeopleinterestedMobile professionals, N3
122、70Messaging/emailInformation(stockquotes,news,weather,restaurants)M-shoppingM-stocktradingM-advertisingEntertainment(ringtone&screendownload)Source: Surveyresearch;TeamanalysisModern youth, N50017.119.821.022.161.290.019.535.123.725.768.786.34402PDChinaMobileTelecomsServiceIndustry020403.pptKEY MESS
123、AGES4. Regulatory changes loom, particularly with the accession of China to the WTO. While foreigners will be unlikely to set up MVNOs, WTO will allow greater participation of foreigners in basic and value added services, although geographic limitations will exist through 2004 and Chinese players wi
124、ll be required to own at least 50% of telecom service ventures (51% for basic services). Regulatory risks remain, with no means to appeal regulator decisions, unclear interpretation of regulation including WTO commitments, and the governments track record of intransparent and unpredictable decision
125、making. (See separate regulatory PD for details)*Mobilevirtualnetworkoperator4502PDChinaMobileTelecomsServiceIndustry020403.pptREGULATORY AND POLITICAL CHANGES AND IMPLICATIONS FOR FOREIGNERS PLAYING IN telecom LOOM20012002200320042005WTOAccessionChangeinpoliticalleadershipAnnouncementofsuccessionTr
126、ansitionofpowerinseniorleadershipImplicationsfor foreigners+Limitationsonpartnershipstructuresliftedgradually+OperatorswillbemoredealreadyoncelawsareofficialForeigninvestmentswillstillbeinitiallyrestrictedgeographicallyRiskforshiftinregulatorydirectionandpolicymakingChangemaymakerelationshipinvestme
127、ntsobsoleteMaximumfore-seeableopeningofVASinChinatelecommarketUpto30%withinoperatingDecisionpointKey events3cities(BJ,SH,GZ)17citiesnationwidePromulgationofTelecommunicationsLawMobilizationoftelecommunicationscommissionZhuRongjitomobilizecommissionandleadsectorreformDraftingofforeigninvestmentlawint
128、elecommunicationsUpto50%withinoperationForeignandgeographicalrestrictionsDecember,2001Mustbecompletedbefore/attimeofWTOaccessionNotlikelytoexpandbeyondWTOconcessionsWuJichuanpromisedadraftbyJanuary1st.However,comprehensivelawnotlikelytobedraftedinthattimeaccordingtoindustryinsiders.Lawnotlikelytoexp
129、andbeyondWTOconcessionsRelevantlegislationDraftingofadevelopmentblueprintforthetelecommunicationindustrytomanageoperationoffixed-line,mobileandInternetbusinessMobilevoiceanddataservicesValue-AddedServicesUpto25%withinoperatingUpto35%withinoperating3cities(BJ,SH,GZ)17citiesNation-wideUpto49%withinope
130、ratingUpto49%Maximumfore-seeableopeningofbasicservicesinChinatelecommarketSource: Legalandindustryinterviews;teamanalysis46MVNOs ARE NOT LIKELY TO BE VIABLE IN THE FORSEEABLE FUTURELegal statusCurrent activityFuture prospectsMVNOoperationwouldrequirealicenseLicenseswouldbesubjecttogovernmentapproval
131、Regulationsgoverningbasicservicesandvalue-addedserviceswouldapplytoMVNOsincludingrestrictionsonforeignparticipationCurrentlyahottopicdiscussedbyindustryfollowersasameanstohelptransformserviceorientationofChinastelecomlandscapeMVNOsorservicesrunningonequipmentinfrastructureoflicensedoperatorsdoexist,
132、includinginfixedline;however,theseareillegalandthegovernmentiscurrentlycrackingdownontheseinfractionsinaneffortreminiscentofcrackdownofChinese-Chinese-Foreigncompanies(CCFs)MVNOactivityisreportedlypresentinLiaoningandSouthernprovinces;thesearealsonotrecognizedlegallybythegovernmentandhavebeenretaine
133、dbydisgruntledinvestorsofthePLAsGreatWallCDMAnetworkandwilllikelydisappearafterassettransfertoUnicomiscompletedChinesegovernmentisdiscussingMVNOconceptasameanstoavoidcapacityoverbuild,particularlywithnewlicenseesExistingoperatorsunlikelytoconsiderMVNOs,particularlyinkeyandattractiveregionsgivenspect
134、rumshortagesandnodesiretoincreasecompetitionMVNOswouldstillrequirealicensefromthegovernment,willbelimitedgeographicallythrough2004,andevenbythen,require50%ormoreChineseownershipMVNOs are not likely to be introduced in the foreseeable futureSource: Legalinterviews;IndustryinterviewsSource: Legalandin
135、dustryinterviews4702PDChinaMobileTelecomsServiceIndustry020403.pptForeignoperatorscanobtainupto30%ownershipinBeijing,Shanghai,GuangzhouForeignoperatorscanobtainupto49%ownershipin17citiesForeignoperatorscanobtainupto50%ownershipnationwideVALUE ADDED SERVICES WILL BE LIBERATED UNDER WTO QUICKER THAN B
136、ASIC TELECOM SERVICES BUT LIMITATIONS WILL REMAIN* WTOentrypotentiallyeffectiveJanuary2002withlikelyNovember2001ratificationSource: Literaturesearch;WTOWorkingTeamReportNovember13,2001Mobile voice anddata servicesUponentry(2002)*Foreigninvestorscanobtainupto25%ownershipBeijing,Shanghai,GuangzhouAfte
137、r3years(2005)After1year(2003)Telecom VAS(mobile and wireline) After2years(2004)Foreigninvestorscanobtainupto35%ownershipin17citiesForeigninvestorscanobtainupto49%ownershipin17citiesForeignerswillstillbeprohibitedfrominvestingoroperatinginfiber-opticnetworkLicenseavailabilitywillbestrictlylimitedeven
138、afterWTOaccessionandsubjecttoChinesegovernmentapprovalForeigninvestmentislimitedtonomorethan50%evenpostWTOAfter5years(2007)Foreigninvestorscanobtainupto49%ownershipnationwideUnchanged(foreignparticipationnotallowed)Foreigninvestorscanobtainupto25%ownershipinBeijing,Shanghai,GuangzhouForeigninvestors
139、canobtainupto35%ownershipin17citiesDomestic services (wireline) Foreigninvestorscanobtainupto49%ownershipnationwideAfter6years(2008)Period BasicTelecommunicationservices48VALUE ADDED SERVICES (VAS) ARE DEFINED AS PROVISION OF SERVICES OVER SOMEONE ELSES NETWORK Basic Telecommunication servicesTeleco
140、mmunications VASDefinitionServices includedPagingservicesMobilevoiceanddataservices:Analog/digital/cellularservicesPersonalcommunicationservicesDomesticServicesVoiceservicesPacket-switcheddatatransmissionservicesCircuit-switcheddatatransmissionservicesFacsimileservicesDomesticprivateleasedcircuitser
141、vicesInternationalServicesVoiceservicesPacket-switcheddatatransmissionservicesCircuit-switcheddatatransmissionservicesFacsimileservicesInternationalclosedusergroupvoiceanddataservices(useofprivateleasedcircuitserviceispermitted)ProvisionofservicesoverothersnetworkSource: WTOWorkingTeamReportNovember
142、13,2001OwnershipofnetworksFixed,domestic,longdistanceandlocaltelephoneElectronicmailVoicemailOn-lineinformationanddatabaseretrievalElectronicdatainterchangeEnhanced/Value-addedfacsimileservices(includingstoreandforward,storeandretrieve)CodeandprotocolconversionOn-lineinformationand/ordataprocessing(
143、includingtransactionprocessing)BACKUP49APPENDIX- PLAYERS PROFILEChina Mobile and China Unicom are duopoly in Chinas mobile telecom service market. China telecom, China Netcom, China Railcom, and Jitong(newly merged by China Netcom) are potential players of this market.5002PDChinaMobileTelecomsServic
144、eIndustry020403.pptPLAYER PROFILE CHINA MOBILEStrategic DirectionSubscriber BaseFinancial HighlightsMarket CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom Breakup*Revenue BreakdownBasic InformationLargestmobileoperatorinChinaOwnandoperatemobilenetw
145、orksacrossChinasinceearly1990sEstablished:1999Headoffice:BeijingCEO:ZhangLigui#ofemployee:38,343(CMHK)StrategyMaintainmarketshare&keephigh-endcustomersinmobilebusinessEnterInternetbusinessmobileandfixedBeonleadingedgeoftechnology30%of2005revenuefromnon-voiceservicesNew initiativesLaunched“Monternet”
146、toactivelypreparefor3GCMHKwillacquiremobilenetworkintherest18provincesfromCMCCearlynextyear(CMHK)US$BillionRevenueEBITDAProfitROE11.7*8.56.44.72.20.630%14%20001999Stockprice:HK$24.10MarketCap:HK$440bn(Oct.30,2001)UsagefeesMonthlyfeesConnectionfeesOtherChinaMobileMinistryofFinance100%75%25%100%Unlist
147、edProvincialnetworkCMHK(listed)Publicshareholder*IncludesVodafone(2.0%)*TotalChinaMobilerevenueisUS$14.3billionStrengthLeaderinChinasmobilemarketExtensivecoverage&comprehensivenetworkStrongstrategicpartnerlikeVodafoneStrongbrandQuickertomarketnewvalue-addedserviceOwnsitsownR&DarmWeaknessUnderconstan
148、tthreatduetoUnicomslowpricepolicyARPUisthreatenedbytheincreaseinprepaidsubscriberSource: Literaturesearch;industryinterviews;IDC;Teamanalysis100%Vodafonehas2%stakeinCMHKSubscriberMillionARPUUS$/m199920003867199920003022MobilevoiceserviceMobiledataserviceNoimpactOriginalproposaltomergewithJitongrejec
149、tedbasedonconflictwithcorporategovernanceofpubliclyheldfirm5102PDChinaMobileTelecomsServiceIndustry020403.pptPLAYER PROFILE CHINA UNICOMStrategic DirectionSubscriber BaseFinancial Highlights*Market CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom Br
150、eakupRevenue BreakdownBasic InformationThe1stoperatorintheworldoutsideUStooperatelargescaleCDMA&GSMnetworksOwnandoperate2ndlargestmobilenetworkacrossChinasince1996Established:1994Headoffice:BeijingCEO:YangXianZhu#ofemployee:35,400(listedcompany)StrategyBettingonCDMAtowinhighvaluesubscribersfromChina
151、Mobile30%of2005revenuefromnon-voiceservicesIncreasenetworkcoverageandqualityinfixed-lineFocusfixed-linebusinessoncorporateusersNew initiativesInvestUSD18mmtobuildupethernetfiberacross9provincesandinvestUSD30bninnext5yearsinitsvoiceanddatabusinessUS$BillionRevenueEBITDAProfitROE2.92.11.30.70.40.16%7.
152、6%20001999Stockprice:HK$7.35MarketCap:HK$91bn(Oct.31,2001)CellularserviceFixedline&dataPagingservice*includingMII,MOR&MOEP*1.5%heldbyHutchison*AllthedataareofCU(listed)StrengthDataspeedadvantageoverChinamobilewithCDMAnetworkNospectrumshortageonCDMAFirstmoverinbuildinghigh-capacitybackbonewithnationa
153、lreachWeaknessNetworkuseshybridATM/IP-basedtechnology,whichismoreexpensivetooperatecomparedtoapureIPnetworkMinistryofFinance77%23%Unlistednetwork&CDMAnationwideCU(Parent)ChinaUnicom(listed)PublicSharehol-ders*79%13minorityshareholders*21%100%Source: Literaturesearch;industryinterviews;TeamanalysisHu
154、tchisonhas1.5%stakeinChinaUnicomLtd.(listed)SubscriberMillionARPUUS$/m19992000519199920001914Fixed-linetelecomserviceMobilevoiceanddataservice(GSM&CDMA)Internet-relatedservicePagerNoimpactOriginalproposaltomergewithChinaRailcomrejectedbasedonconflictwithcorporategovernanceofpubliclyheldfirm5202PDChi
155、naMobileTelecomsServiceIndustry020403.pptPOTENTIAL PLAYER PROFILE CHINA TELECOMStrategic DirectionSubscriber BaseFinancial HighlightsMarket CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom BreakupRevenue BreakdownBasic InformationIncumbentfixed-line
156、providerinChinaOwnandoperatefixed-linenetworkscoveringacrossChina,anditsfiberlinesis1.2millionkm,covering75%+ofChinacities&countiesEstablished:1994Headoffice:BeijingCEO:ZhouDeqing#ofstaff:533,000StrategyStrengthenfixed-linestatus,doublingitsfibernetworkoverthenext5yearsSupplementfixed-linebusinesswi
157、thfast-growingmobilebusinessNew initiativesIPOin2002or2003Facingbreakupto2companiesUS$BillionRevenueProfitROA19.818.60.11N/A0.17%N/A20001999LongdistanceserviceData/internetLocalvoiceStrengthComprehensivenationwidenetworkwhichdominateslast-mileaccesstocustomersExtensivecustomerrelationshipsgivenitsst
158、atusastheincumbentWeaknessLikelytobesaddlewithnationalserviceobligation,abigissuegiventhewideincomedisparitiesinChinaSource: Literaturesearch;industryinterviews;TeamanalysisLocalAcrossISPChinaTelecomMinistryofFinance100%100%100%FixedDatacom100%AT&Tinvested25%inShanghaiSymphonyTelecomOthercooperation
159、swithJ-phoneandBritishTelecomFixed-line19992000109144LocalandlongdistancevoiceserviceData/InternetISP20002001E4.17.4InternetNOT LISTEDSpiltintotwocompaniesTworegionalmonopoliesbecreatedoutofonenationalincumbentNorthernUnitwillmergewithCNCandJitongBothunitswillbereleasedfrompublicobligationBothunitsl
160、ikelytoreceivemobilelicenses5302PDChinaMobileTelecomsServiceIndustry020403.pptPOTENTIAL PLAYER PROFILE CHINA NETCOMStrategic DirectionStrategic DirectionFinancial HighlightsMarket CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom Breakup*Basic Inform
161、ationSource: Literaturesearch;industryinterviews;Teamanalysis;JPMorganRevenue BreakdownOwns9,376km40GBtrunknetworkconnecting17majorcitiesEstablished:1999Headoffice:BeijingCEO:EdwardTian#ofEmployees:2,674Raised$325millionfor12%stakethroughprivateplacementin2001IdentityofJVpartnersremainsunclearStreng
162、thHighqualitymanagementHighcapacitybackbonebasedonIPtechnologyStronglypositionedoninternationalbandwidththroughalliancewithC2CandpotentialinternationallinkthroughitsHongKonggatewayWeaknessInadequatelast-mileaccesstocustomerscurrentlyStrategyFocusonprovidinghighquality,low-costinfrastructure&valueadd
163、edservices&solutionsTargetcommunication-intensivecorporateandhigh-endresidentialcustomersCompetethroughdifferentiation&distinctivevaluepropositionBuildastrongbrandEstablishstrategicpartnershipwithworld-classtech/bizleadersVoIPcard&CorporateDataServicesBackbone&bandwidthwholesaleVPN,highspeedbandwidt
164、h,internationalintegrateddataservicesRevenue2000US$million65ChineseAcademyofScienceSARFT15%40%100%SHGovtCNCMinistryofRailwayPrivateinvestors15%15%15%NOT LISTEDTurnedprofitinSept.,2001LeaseBandwidthDataVoiceMergewithChinaTelecomNorthernUnitandJitongObtainvaluablefixed-lineinfrastructureandbusinessGet
165、accesstolastmiletoboostexistingbackbonenetworksandbusinessNew initiativesPrivateequityreplacementinFeb2001CorporatedataservicelaunchedStrongtake-upinNetcomsIDCSignedagreementwithSingTelthusbecomelessreliantonCTininternationalbandwidth5402PDChinaMobileTelecomsServiceIndustry020403.pptPOTENTIAL PLAYER
166、 PROFILE CHINA RAILCOMStrategic DirectionSubscriber BaseFinancial HighlightsMarket CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom BreakupRevenue BreakdownBasic InformationOwn2ndlargestfixed-linenetwork(120,000+km)inChinacovering500+citiesInternetc
167、overs36cities;pagingnetwork1300+cities;IP16citiesFibernetworkis42,000kminlengthand10,000kmofitsbackbonehasbeenupdatedwithDWDMEstablished:Dec.,2000Headoffice:BeijingCEO:CuiQing#ofemployee:65,000StrategyStrengthentheservicetorailwaytransportationExplorepublicmarketEnhanceservicequalityFocusonHRandTech
168、nologyNew initiativesInvest$240mninbroadbandnetworkconstructionInvest$384mninfixed-linenetworkconstructionEntersatellitecommunicationbusinessStrengthExistingnationwidenetwork10-20%priceadvantageWeaknessNetworkareallconstructedalongrailway,restrictingdevelopmentofservicetopublicNetworkneedtobeupgrade
169、tomeetthemassivecommunicationdemandofpublicFinancingchannelneedtobeexploredLackoftalentSource: Literaturesearch;industryinterviews;TeamanalysisAcquired20%shareofShinStaellitePCL(Thailand)withcashandstockexchange49%100%CRCMinistryofRailway15chinarailwaybranches51%NOT LISTEDFixedlinevoiceservicePaging
170、IP,DLDBackboneleasingRevenueAssetRegisteredCapital2000US$billion0.121.61.3Fixed-linePager2000million1.01.4N.A.NoimpactOriginalproposaltomergewithJitongrejectedbasedonconflictwithcorporategovernanceofpubliclyheldfirmCandidateformobilelicense(likelyTD-SCDMA)5502PDChinaMobileTelecomsServiceIndustry0204
171、03.pptPOTENTIAL PLAYER PROFILE JITONGStrategic DirectionSubscriber BaseFinancial HighlightsMarket CapService OfferingMain PartnershipStrengths & WeaknessesOwnership StructureImpact of China Telecom BreakupRevenue BreakdownBasic InformationStrategyLeadingcomprehensivetelecommunicationcompanyMeetcusto
172、mersdemandswithtailoredservicesNew initiativesIPO2ndtimepostponedSignedagreementwithNortelandDigitalChinatobuildself-ownedbackboneStrengthAmarketleaderinVoIPNationwidenetworkandvarioustechnologies,e.g.satellite&SDHOwncustomerloyaltyStronginsalesgivenitssmallerscaleofoperationWeaknessFinanciallyweakf
173、orfurtherexpansionandinfrastructureinvestmentManagementstyleisstronglyentrenchedwithSOEmentalityQualitypersonnelleavingtojoinothertelecomco.HeavilydependantonVoIPrevenuesSource: Literaturesearch;industryinterviews;TeamanalysisiPassNortel,DigitalChinaNOT LISTEDShanghaiHuaHongIRICO45%0.14%SDICElectron
174、icsJiTong5%OtherSOEsMII40%10%Internetconnectivity-dialuppermanent(viafiber,microwave,&satellite)VoIPVAS&VPNIDC199920000.31.1SubscribermnRevenue2000US$million60IPinfrastructureandvalue-addedserviceproviderLeadingISP&VoIPplayerinChinawithtelecomservicemarketshareof10%Establishedin1994ISPlicensedin1995
175、IPphonelicensedin2000Licensedin1998tooperateChinaGBN,ChinasnationalpubliccomputernetworkCoverage:200cities#ofemployee:2000MergingintoChinaNetcominApril2002ISPVoIP&others43%57%TobemergedwithChinaNetcomandtheNorthernUnitofChinaTelecom5602PDChinaMobileTelecomsServiceIndustry020403.pptAPPENDIX- 3G TECHN
176、OLOGY STANDARDS CHOICESMobile technology in China is advanced and cutting edge. Operators are launching packet switch networks in GPRS and CDMA 1XRTT, and plan to launch 3G by 2003. The country will likely three technologiesW-CDMA, TD-SCDMA and CDMA2000in some form or another. China has actively bee
177、n developing TD-SCDMA, which has significant benefits over other alternatives, as an ITU approved 3G standard. 5702PDChinaMobileTelecomsServiceIndustry020403.pptCURRENT PUBLIC MOBILE SERVICE SPECTRUM RESOURCE ALLOCATION IN CHINA COVERS BOTH GSM AND CDMA825835870880885890909915930 935954 960ETSIGSMsp
178、ectrumUpDownUpDownUnicomCDMA10mhzCMCCAnalogreallocation5mhzCMCCGSM19mhzUnicomGSM6mhz1710172017451755178518051815184018501880ETSIGSMspectrumUpUpCMCCGSM19mhzDownDownUnicomGSM10mhzSource: Operatorinterviews5802PDChinaMobileTelecomsServiceIndustry020403.pptCHINESE OPERATORS MOVING AGGRESSIVELY TO ROLL O
179、UT PACKET NETWORKSKey eventsTransferofnonCMHKoperatorstoCMHKLaunchofGPRS3GtrialsLaunchof3GLaunchofGPRSCDMAlaunchImplication by periodProjecteddateProjectedtimingrangeSource:Interviews;literaturesearchNow2002200320042005ExistingoperatorspreparingforwirelessdataCrucialtimeperiodfor3Gdecisionandpositio
180、ningwithnewoperators3GnetworksandnewmobileoperatorsemergingGrowthandmaturationof3GapplicationsOctobercommercialtrialsOctobertrials(64Kbps)IxRTT(140kbps)3-4additionalprovincialoperatorsLaunchLaunchChina MobileChina UnicomExisting networksGSMGSM/CDMA5902PDChinaMobileTelecomsServiceIndustry020403.pptBO
181、TH CHINA MOBILE AND UNICOM* FOCUSED THEIR GPRS PILOTS IN COASTAL AREASBeijingMobile/Motorola,1.4msubsTianjinMobile/Motorola,500,000subsLiaoningMobile/Huawei,1.3msubsShanghaiMobile/Siemens,2msubsZhejiangMobile/Alcatel,2.5msubsFujianMobile/Nokia,2msubsGuangdongMobile/Ericsson,5.7msubsRationale Voicewi
182、llremainkeyrevenuesourceformobileoperatorsintheshortrunDemandsfordataservicewillprimarilyoriginatefromdevelopedcoastalarea&majorinlandcitiesMobiledataserviceisfarfromdeveloped,whichlimitsittocoastalareasItisestimatedbyChinaMobilethatGPRSmarketsizewillreach1millionbyendof2001ChinaMobile*Unicom*WuXiUn
183、icom/Ericsson,SubscribersN/AShanghaiUnicom/Nokia,360,000subsShenzhenUnicom/Motorola,270,000subsGuangdongUnicom/Nokia,1msubs* UnicomGPRStrialsonholdasattentionhasshiftedtoCDMA*Subscribernumbersfromearly2000Source:Literaturesearch,industryinterviews6002PDChinaMobileTelecomsServiceIndustry020403.pptCHI
184、NA UNICOM HAS LAUNCHED NATIONWIDE CDMA NETWORK AS BASIS OF CDMA2000 NETWORKCapacityofsubs,Million20012002E2005E152050CDMA20001XRTTIS-95Source:Literaturesearch,industryinterviewsTechnology CAGR 35%6102PDChinaMobileTelecomsServiceIndustry020403.pptEVOLUTION OF MOBILE RADIO STANDARDS IN CHINA LEADS TO
185、THREE 3G ALTERNATIVES* Availablebyendof2002* AssumingdualmodeGSM/W-CDMAsolutionSource: Variousvendors;McKinseyanalysis2G2.5GIS-95AGSMCDMA20001xRTTCDMA(ChinaUnicom)GSM(ChinaMobile,Unicom)IS-95BGPRSChina timingPresent2002W-CDMA*(UTRAFDD)CDMA20003xRTTTD-SCDMA3G2003TSM*2003-20046202PDChinaMobileTelecoms
186、ServiceIndustry020403.pptOUTLOOK FOR 3G STANDARDS IN CHINAAll 3 standards likely to exist in some capacity in ChinaW-CDMATD-SCDMACDMA2000China outlookAggressivelymarketedbyMNCvendorsRemainsthemostwidelyknownstandardandwillprobablyexistinChinaFavoredbygovernmentasthefirst3GstandardtobedeployedinChina
187、SeenasChinesetechnology,whichisveryimportanttodevelopmentofChineseITindustryUnicomplanningtoupgradeCDMAnetworkto1XRTTinearly2002Support in ChinaEricssonNokiaOperatorsHuaweiGovernmentOperators(reluctant)DatangSiemensNortelHuawei(moderatesupport)QualcommLucentSamsungZTEChinaUnicomGovernmentandoperator
188、supportforTD-SCDMADelayedavailabilityofFDDspectrumAvailabilityofW-CDMAoutsideofJapan(includingdualmodehandsets)TechnologydevelopmentTerminaldevelopment(chipset)LowermarketawarenessandconfidencebyoperatorsNotclear3GlicenseforCDMA2000wouldbegranted,orifexistingCDMAlicenseallowsupgradesto1XRTTand3XRTTM
189、ain obstacles in ChinaSource:McKinseyanalysis;Industryinterviews6302PDChinaMobileTelecomsServiceIndustry020403.ppt3G SPECTRUM HAS ALREADY BEEN ALLOCATED FOR W-CDMA AND TD-SCDMA, ALTHOUGH FDD SPECTRUM (W-CDMA) IS CURRENTLY USED FOR WLL IN SOME CITIES20 mhz30mhz60mhz15 mhz60mhzVoidTDDFDD (uplink)Satel
190、liteTDDVoidFDD (downlink)Void188519001920198020102025211021702200Air interfaceModeSpectrum rangeTotal spectrumBandwidthAvailabilityTD-SCDMATDD1900-19202010-202535mhz1.6mhzAvailablenowW-CDMAFDD1920-1980(UL)2110-2170(DL)60mhz5.0mhzCurrentlybeingusedincertaincitiesforWLL,andexpectedtobecleanedupby2003-
191、2004Source: TheInternationalEngineeringConsortium(IEC);Interviews;MII6402PDChinaMobileTelecomsServiceIndustry020403.pptW-CDMA IS SCHEDULED FOR LAUNCH PER CHINA MOBILE BY 2003, ALTHOUGH SOME QUESTIONS REMAIN ABOUT VIABILITY OF TECHNOLOGY AND AVAILABILITY OF DUAL MODE HANDSETSLaunchin2003-2004*Notavai
192、lableuntil2H2002attheearliestwhentheW-CDMA/GPRSdual-modephonebecomeavailable,andmaybedelayeduntilTD-SCDMAlaunchedSource:Industryinterviews;Governmentinterviews;McKinseyanalysis20022003200420052001TechnologyPossible launch scheduleAllocatedtoFDDbutnotreadytoawardtooperatorsFDD SpectrumFDDspectrumandl
193、icensewillbeawardedtooperatorsCommerciallyavailable*6502PDChinaMobileTelecomsServiceIndustry020403.pptTD-SCDMA IS LAGGING BEHIND IN TERMS OF COMMERCIALIZATION AMONG 3G CANDIDATESMobile network equipmentMarket awarenessCDMA20001XRTTtechnologycommercialwith400,000usersinKoreaChinaUnicomwillconstructCD
194、MA20001Xtestnetworksin10-15majorChinesecitiesCDMA20003XRTTisinpreliminaryR&DphaseCDMA 2000GrowingsupportespeciallybyUSoperators400,0001XRTTusersinKoreatodayJapaneseoperatorswillalsoadoptPrimarilysupportedbyUSandKoreanvendorsEquipmentcommercializationnearlyfinishedinJapan44contractsforW-CDMAsourcingf
195、inalizedTestnetworksarenotperformingwellW-CDMAPreviously,themostwidelyacceptedtechnologyForatime,hasbeenpreferredoptionfor3GtechnologybymostoperatorsLargevendorbasesupportledbyEricsson,NokiaMobile terminalLucenthasCDMA2000(1XRTThandsetprototype,laterthisyearmassproductionstartsQualcommdevelopingdual
196、modechipsetforCDMA2000andW-CDMAChipsetdesigncompletedNoprototypeavailableUnclearwhenW-CDMAterminalswillbeavailableoutsideofJapanSomequestionwhetherdualmodeGSMW-CDMAhandsetswillbeavailablebefore2004Time to marketCDMA20001XRTTtobelaunchedinearly2002NotimescheduleforCDMA20003XRTTintroductionUnclearwhet
197、herCDMAlicenseincludes1XRTTor3XRTTOverallpostponingofW-CDMAtimetomarket.Possiblynotlaunchedonlargescalenationwidefor2-3years,duetocomplexitiesofdualmodesolutionNetworkequipmentprototypewillbeavailablebyendof2001CallbetweenterminalprototypecompletedonApril27Videotransmittedbetweenbasestationsandtermi
198、nalsonJuly4TD-SCDMASignsofmobilizationforchipsetdevelopmenthaveappeared(Qualcomm,TI,Phillips)Chipsetdesignisexpectedbyproponentstobecompletedin2002Prototypeandcommercialhandsetswillpotentiallybeavailablebylate2002ProponentsexpecttolaunchinChinabyendof2002ProponentsexpectTD-SCDMAtopotentiallyenterint
199、ernationalmarketsafterChinalaunchViewedasinferiorChinesetechnologydespitetechnicaladvantagesandsignificantSiemenscontributionLowerawarenessandacceptancebyindustrythoughacceptedbyITUand3GPPCurrentlySiemensandDatangarethekeysupportingvendorsSource:Industryinterviews;Analystreports6602PDChinaMobileTele
200、comsServiceIndustry020403.pptTD-SCDMAS PROSPECTS LARGELY DEPENDS ON THE TIMING AND VIABILITY OF TECHNOLOGYTD-SCDMA TechnologyPossible launch schedule2002200320042005TDDspectrumisreadytobedistributedtooperatorsassoonastechnologyisready2001Scenario1Trial*CommerciallyavailableScenario2TrialCommercially
201、availableScenario3TrialFailsScenario1Launchin2003Scenario1Scenario2Launchin2004Scenario2Scenario3TD-SCDMA never launchesScenario3TDD SpectrumThe timing of the commercial availability of TD-SCDMA technology can be summarized in 3 scenarios. In scenario 1, TD-SCDMA is available by the end of 2002. In
202、scenario 2, development is delayed due to terminal inavailability, and launch occurs in 2003. In scenario 3, TD-SCDMA fails to launch* Trialswillincludeinfrastructurebuildoutin2002Source: Industryinterviews;McKinseyanalysis6702PDChinaMobileTelecomsServiceIndustry020403.pptTD-SCDMA ALSO HAS ADVANTAGE
203、S IN MIGRATING FROM GSMNewhardwareinvestments9.6KbpsBothpathsbeginfromGSMnetwork2 G115KbpsPathconvergencecontinuesthrough2.5G2.5 GMigrationData trans-mission rate Comment 384Kbps(mobile)2Mbps(stationary)ContinuedleverageofGSMnetworkforTD-SCDMAMixedapplicationcapabilityInvolveswidespreadnewinvestment
204、384KbpsTSM:3GlikeperformancewithminimaladdedinvestmenttoGSMnetwork2001Late2001/200220032003-2004GSMBTSMSCTD-SCDMA pathW-CDMA pathBSCGSMUMSCTD-SCDMANodeBTD-SCDMANodeBFDDNodeBFDDNodeBUMSCW-CDMA3G TD-SCDMARNCBSCenhancedMSCGSMBTSBSCenhancedTD-SCDMAGSMBTSGPRSBSCPCUMSCSGSNGGSNTD-SCDMANodeBSGSNGGSN3 GGSMBT
205、SMSCBSCGSMGSMBTSGPRSBSCPCUMSCSGSNGGSNRNCSource: Industryinterviews6802PDChinaMobileTelecomsServiceIndustry020403.pptOPERATORS WILL NOT NECESSARILY DECIDE 3G STANDARD, AS MANY STAKEHOLDERS WILL HAVE INFLUENCE, AND THE GOVERNMENT HEADS THE LIST StakeholderRelevant entitiesGeneral positionDegree of inf
206、luenceGovernmentStateCouncilStatePlanningandDevelopmentCommissionMinistryofScienceandTechnologyMinistryofInformationIndustriesLowawareness.Willconsidergeopoliticalpressureandnegotiations.ExpectedtosupportTD-SCDMAbasedonnationalinterestindustrydevelopmentLowawareness.ExpectedtosupportTD-SCDMAbasedonn
207、ationalinterestStrongsupporterofTD-SCDMAbasedonChineseoriginGenerallyastrongsupporterofTD-SCDMAbut,somedissentwithintheministryOverridingdecisionmakingpoweroverallotherentitiesNexttoStateCouncil,greatestpowerStrongadvocatebutnotcentralPrimarydecisionmakerOperatorsExistingNewChinaMobileChinaUnicomPre
208、fersW-CDMA,duetolackofconfidencewillsupportTD-SCDMAifinnationalinterestWilltrytodevelopCDMA2000.UnclearhowtodevelopGSMnetworkStrongerconfidenceinW-CDMA,butlessstrongviewonimportanceofstandardUnclearabouttechnologies.WillsupportnationalinterestsEagertoadoptandrolloutTD-SCDMAasplayforgovernmentsupport
209、Stateownedflagshipoperator;willacceptgovernmentdecisionsininterestofcountryMayhavegeneralbargainingchipwithCDMAdecisionWilltakewhateverspectrumisgrantedbyMIIWilldowhateverMIIplansLittledirectinfluencegivenownershipbyMinistryofRailwaysChinaNetcomChinaTelecomChinaRailcomLocalequipmentvendorsDatangHuaw
210、eiZTECo-developerofTD-SCDMASupportsTD-SCDMAbutinvestingheavilyinW-CDMAStrongsupportforCDMAgivenQualcommsupportFavoredsonofMIIgivenhistoricaffiliationbutquestionsaboutcapabilityofCATTPrivatizedbutmostcompetentlocalvendorViewedassuccessfulSOEForeignequipmentvendorsEricssonMotorolaNokiaSiemensNortelAgg
211、ressivelypushingW-CDMAHedgingandwaitingtoseeduetofailedbeton2GPositionprobabilityinbetweenEricssonandMotorolaSupporterofTD-SCDMA,buthedgingwithW-CDMAProvideralltechnologies,butcooperatingonTD-SCDMARNCtogainfavorInfluencethroughgovernmentlobbyinganddiplomaticmissionIndirectinfluencethroughoperatorsLo
212、calhandsetplayersEricssonBirdKejianManyothersEagertogaintechnologiesManyrecognizeTD-SCDMAaseasierpathforgainingdomesticmarketshareLowindividualinfluenceGovernmentwillconsiderimpactof3GonthemOtherstakeholdersQualcommTexasInstrumentsVariouspositionsCompetingforchipsetvalueStronglobbyingforce(Qualcomm)
213、Source:Industryinterviews6902PDChinaMobileTelecomsServiceIndustry020403.ppt3G REGULATORY RESPONSIBILITIES3G regulatory tasksResponsible organizationProgressFrequencyallocationRadioFrequencyAdministrationDept.,MII3GspectrumspecificationcompletedFDDspectrumsneedtobecleaned-up3GstandarddecisionStateCou
214、ncilScience&TechnologyDept.,MIIScience&TechnologyDept.,SPDCVariousresearchinstitutes(CATT,RITT)Currently3GradiostandardssettingarestillunderdiscussionWaitingandhopingthatTD-SCDMAisviable3GtimingScience&TechnologyDept.,MIITD-SCDMAcanbeginanytimeOtherstandardsin2002or2003TelecomAdminDept.,MIIStateCoun
215、cilSPDCMostlikelywouldawardtoexistingoperatorsand1-2newoperators3Gsupplierqualification(licensing)PlanningDepartment.,MIITelecomAdministrationDepartment.,MIIAllexistingMNCsuppliersarelikelytoreceivelicenses,ifproductsmeetspecificationLocalsupplierswillbepreferredNewentrantsreviewedontechnologyandsub
216、jecttoimportrestrictionifnotmanufacturedlocally;approvalforentryofnewvendorslikelytobelimited3GoperatorlicensingandallocationofspectrumDecisionmakerSource: MinistryofInformationIndustries;CITICCIEC7002PDChinaMobileTelecomsServiceIndustry020403.pptSPDC & MIIs CURRENT POSITION ON 3G STANDARDSProblem a
217、reasCurrent positionViewthisasasuccessofChinesetechnologyViewthisasopportunitiesforlocalindustrytosucceedLocalmanufacturerssupportoutsideofDatangMNCterminalmanufacturerssupportTD-SCDMAThe government clearly supports TD-SCDMAAnticipatedannouncementofsupportforTD-SCDMAcontingentonsuccessoftrialsTDDspe
218、ctrumallocatedforTD-SCDMATD-SCDMAtrialstobepermittedwheneverproductisavailableFDDlicensingmaybedelayedforoneyearMNCsbeingpressuredtosupportTD-SCDMAW-CDMAMonitorandstudyConsideringholdingofflicensesforoneyearafterTD-SCDMAPressurefromEUforfairtradeLobbyingbyMNCsCDMA 2000Notasactivelymonitoredandstudie
219、dasW-CDMAWhether2GCDMAwillbewidelydeployedPressurefromUSforfairtradeNotconfidentyetaboutthetechnologypendingtrialsNeedcommitmentofotherlocalequipmentsuppliersbesidesDatangNeedcommitmentofterminalsuppliersHowever, the government is not ready to make a final decisionSource:MinistryofInformationIndustr
220、ies;Industryinterviews7102PDChinaMobileTelecomsServiceIndustry020403.pptGOVERNMENT RATIONALE FOR TD-SCDMA POSITION BASED ON DESIRE TO INCREASE COMPETITIVENESS OF CHINESE TECHNOLOGY AND CAPABILITY OF LOCAL VENDORSSource: MIIInterviews;RITTinterviews;CITICCIECFactors for considerationSupportoflocalind
221、ustriesIPRsforChinaProtectingexistingnetworkinfra-structureinvestmentPoliticalconsiderations,i.e.,traderelationsDesiretoleadthetechnologydevelopmentDesiretoconformwithglobalstandardSupporting TD-SCDMA becauseAvoidingforeignIPRsPromotingChinesetechnologyandstandardTimetomarketadvantageforlocalsupplie
222、rsPotentialforexportNot promoting TD-SCDMA exclusively becauseThreatofunfairtradepracticeaccusationsPressurefromEUandUSUncertaintyinstandard,productdevelopmentandterminalavailabilityGovernment wants to avoid a market dominated by foreign players as experienced in 2G7202PDChinaMobileTelecomsServiceIn
223、dustry020403.pptCHINA MOBILE MAY ADOPT BOTH TD-SCDMA AND W-CDMA WHILE CHINA UNICOM WILL LIKELY EMPHASIZE DEVELOPMENT OF ITS CDMA NETWORKCurrent operatorsApproach Probability Rationale Quotes China MobileChina UnicomMediumHighChinaMobilewillbeexperiencingGSMcapacityshortfallsinmanymajorcities,whichma
224、yinfluence3GdecisionGivenitsadvantagesinassymetrictransfer,TD-SCDMAbeingconsideredfordataservicingroleChinaMobileislikelytoadoptTD-SCDMAundergovernmentinstructionstosupportnationalinterestsChinaMobileprefersandwilllikelytoadoptW-CDMAjointlywithTD-SCDMAtocomplementeachother“ChinaMobilewilladoptW-CDMA
225、anduseTD-SCDMAascomplementarytechnology Li Mofang, China Mobile “CDMA1XRTTwillbereleasedcommerciallybyearly2002 China UnicomMediumMediumHighChinaUnicomwillfocusonexpandingCDMAnetworktobuildnationalcoverageinthecoming1-2yearsChinaUnicomwillattempttowinhigh-valueclientsfromChinaMobilebyleveragingCDMAs
226、trengthsinqualityandcapacityChinaUnicomwillnotbuildGPRS,focusinginsteadonrolloutofCDMAinOctober,andCDMA20001xRTTinearly2002ChinaUnicomhaslittlepressuretoupgradetheGSMnetworkgivennewspectrumavailabilityontheCDMAnetwork.MigratingtoTD-SCDMAorW-CDMAremainsanoptionbutnotaprioritynoranecessityInternalcomp
227、etitionwillhappenbetweenCDMAandGSM;ChinaUnicommaypositiontheCDMAnetworkasahigh-endnetwork,andtheGSMoneaslow-end3GTD-SCDMAW-CDMATSMGSMGPRSGSMGPRSTDDGSM3GTD-SCDMAW-CDMACDMACDMA20001XRTTCDMA20003XRTTLikelyapproachSource: Interviews7302PDChinaMobileTelecomsServiceIndustry020403.pptTECHNOLOGY PATHS OF NE
228、W OPERATORS WILL LIKELY AVOID SIGNIFICANT INVESTMENTS IN 2G INFRASTRUCTUREPotential new operatorsApproach Probability Rationale Quotes China TelecomChina NetcomLowHighMediumLowRegulatorybodiesarenotinclinedtoawarda2GlicensetoChinaTelecomPlanstowaituntil3Gentersmarketandadopt3GdirectlyLackofexperienc
229、einmobilewillmakeChinaTelecommoreattentivetogovernmentmandatesandopentoTD-SCDMACDMAremainsaremotepossibilitydependingoninavailabilityofTD-SCDMAorW-CDMAandmigrationofCDMAbasedWLLnetwork“AsalmostallofourmobileexpertsareallocatedtoChinaMobile,wehavetorelyongovernmentmandates.Wewilladoptwhatevertechnolo
230、gybasedonwhicheverbandwidththegovernmentallocates China Telecom“WewiilldowhatwecantopreventCMandCUfromtakingafirstmoveradvantageinmobiledata.Wemustenterintomobiledataservicequickly” China NetcomLowMediumMediumVendorsfor2standardsarebeingassessed:MotorolaandNokia(W-CDMA)andSiemens(TD-SCDMA)Agreemento
231、npartnershipwithNokiatoallowNokiaprovidebasicskilltrainingMotorolaareintroducingW-CDMAtoCNCinsteadofCDMA2000SiemensisinvitedtopresentonTD-SCDMAPrefertochoosestandardthatwillgetthemfastesttomarketLikelyapproach* RailroadspectrumSource: IndustryinterviewsChina RailcomTD-SCDMAGSM-R*GSM/GPRS3GTD-SCDMAW-
232、CDMATSMCDMA20001XRTTCDMA20003XRTT3GTD-SCDMAW-CDMATSMGSM/GPRSLease2GfromChinaMobileorChinaUnicom“WewouldliketoentermobileserviceswithTD-SCDMA China RailcomChinaRailcombelievesadoptingTD-SCDMAwouldincreaselikelihoodofgainingbroadmobileservicelicenseHigh7402PDChinaMobileTelecomsServiceIndustry020403.ppt
