Oct 28, 2009 22:21 JST

Source: IRG

IRG Technology, Media and Telecoms Weekly China Market Review

HONG KONG, Oct 28, 2009 - (ACN Newswire) - The following is the China excerpt from IRG's TMT Weekly Market Review Oct 19 - Oct 25. IRG is a financial advisory and investment firm focused on the core growth sectors in Asia with particular focus on the telecommunications, media and technology (TMT).

Internet

- Baidu Inc. and China Unicom signed a strategic cooperative agreement on wireless search. Baidu will offer a full range of wireless search technologies, including WAP search and webpage search to China Unicom, and the mobile search service, which is operated by the two sides, will be available on the latter's mobile homepage. Meanwhile, the two firms will launch deep cooperation in wireless search technology, product innovation, brand promotion, and research and development of industrial standard. Since China Unicom boasts great advantages in the field of wireless communication, and Baidu has rich experiences in research and development of search products, the cooperation will bring search services of higher quality and more convenience to wireless service users.

- Sina will receive 30 percent of the future profit generated by China Real Estate Information Corporation (CRIC), a subsidiary of Shanghai-based real estate services company E-House that is also partially owned by Sina. 30 percent of CRIC's profits will greatly exceed the profit from Sina's independent real estate service. E-House and SINA will hold 51.01 percent and 33.99 percent of CIRC's outstanding ordinary shares following the deal. Following the listing, E-House Executive Chairman of the Board Zhou Xin and Sina CEO Charles Chao will serve as CRIC's joint chairman. Sina will inject its online real estate business into its majority-owned subsidiary China Online Housing Technology Corporation and transfer its interest in the subsidiary to CRIC in exchange for a 39 percent stake in CRIC. The deal was conditional upon CRIC completing an initial public offering on a major U.S. stock exchange.

Mobile/Wireless

- China had seen a 3G mobile phone sales volume of more than 1 million sets as of October 2009 and its 3G mobile phone sales volume surged 150 percent year on year outpacing its 2G mobile phone sales volume. The nation totally sold 220,000 3G mobile phones in the first half of 2009, and China Mobile and China Unicom separately captured 30 percent and 16 percent market shares, with selling their TD-SCDMA mobile phones and WCDMA mobile phones. Notably, China Telecom took a 54 percent slice. The nation aggregately sold 2.87 million CDMA mobile phones in September, accounting for 20 percent of the Chinese 3G cellphone sales market, and the figure increased nine percentage points compared with 11 percent in December 2008, said SINO Market Research Co., Ltd.

- China Telecom Corp. achieved an about 56 percent surge in its CDMA user base during just ten months after it took over the CDMA service network from China Unicom when the CDMA user base was less than 28 million. China Telecom reached a CDMA user increase of 2.08 million, compared with 2.45 million in July; and its CDMA user base grew to 43.81 million. E surfing, its CDMA service brand, made a big progress in China. China Mobile Ltd. had bred a TD-SCDMA user base of 959,000, China Telecom an EV-DO user base of 1.3 million, and China Unicom a WCDMA user base of 350,000.

- China's Personal Handy-phone System (PHS) user base had reduced to 53.245 million by the end of September, accounting for 20.2 percent of the total fixed-line phone user base compared with 16.4 percent at the end of 2008. The number of fixed-line phone users declined 16.608 million in the first nine months. And 15.686 million of them were PHS users, with an average user loss of 1.743 million monthly.

- China TechFaith Wireless Communication Technology announced that its wholly owned gaming subsidiary 798 Entertainment will provide game content to Chinese mobile phone branding companies aigo, Doov, AMT, QiGi and Flyfot. Mobile phone customers can play built-in and other downloaded games free of charge, and will be charged for purchases of accessories for the games.
Telecommunications

- Cheah Co Ltd, which is controlled by Cheah Cheng Hye, the co-founder of Value Partners, reduced its H-share holding in ZTE Corp to 4.98 percent from the previous 5.08 percent, sources reported. Cheah sold 289,200 shares of ZTE for HK$12.95 million (US$1.6 million) on Oct. 12. The average price of the share transaction was approximately HK$44.79 (US$5.8) apiece. ZTE's controlling shareholder Shenzhen Zhongxingxin Telecommunications Equipment Co Ltd had bought 7.65 million of its A shares as of Oct. 9, 2009, accounting for about 0.42 percent of ZTE's total share capital.

- China Mobile Ltd. had a sharp slowdown in profit growth for January-September period as competition intensified, while rival China Telecom Corp. said its net profit in the same period fell 34 percent due to higher marketing expenses. Competition is intensifying for China's major telecom operators as the government granted three third-generation mobile licenses to three nationwide full services providers in January. Since then, all of them have been striving to ramp up their new 3G services with lower tariffs and higher handset subsidies. China Mobile's earnings will continue to be pressured by falling average revenue per user and growing handset subsidies due to increasing competition from China Unicom and China Telecom. China Mobile posted a net profit of 83.94 billion yuan (US$12.31 billion) for the nine months ended Sept. 30, up 1.8 percent. Revenue rose 8.9 percent.

- China Mobile Ltd. became the world's first phone company with more than half a billion subscribers as price cuts lured users, helping the carrier's profit rebound from its only profit drop in a decade. Third-quarter net income rose 2.6 percent to 28.6 billion yuan (US$4.2 billion). Sales increased 9 percent. China Mobile cut call fees and raised handset subsidies to attract 15.24 million users in the quarter as Chairman Wang Jianzhou expands in lower-income rural areas to fend off mounting competition from China Telecom and China Unicom. The stock fell in Hong Kong trading as earnings missed some analysts' estimates, underscoring the slowing subscriber growth in the world's largest phone market.

- Chinese broker Guotai & Junan Securities released the monthly report for the telecom industry, saying that the industry's revenue keeps increasing and the mobile business sector is still the major force in driving the growth. In the first eight months of this year, China's telecom industry registered revenue was up 3.1 percent on year, and the revenue gained in August was up 6.5 percent. The mobile business sector contributed 62.6 percent share to the revenue. The revenue of fixed-line business slid 3.5 percent month on month. The growth of mobile business made up losses from fixed-line business and maintained a growing trend in general, and the broker believes that driving up by the revival of mobile business, China's telecom industry has left a space of slowing growth triggered by the international financial crisis.

- China's telecom industry generated revenues of 1.88 trillion yuan (US$275 billion) in the first nine months of 2009, up 13.4 percent year-on-year and including 76.97 billion yuan (US$11.3 billion) in September. China added 9.33 million mobile phone users to reach a total of 719.83 million in September. The number of Chinese fixed-line subscribers fell by 2.23 million in September to 323.75 million, while broadband subscribers rose by 2.1 million to total 99.33 million in September.

Media, Entertainment and Gaming

- Giant Interactive Group Inc.'s board chairman and CEO Shi Yuzhu will take charge of the R&D of a next-generation online game project, in which gamers will play an important role in deciding the billing of games. The project has an R&D cycle of three years and has been developed for about one year. The project will bring a revolution to the billing of online games and change the micropayment way. Giant Interactive previously spent much in getting a stake in social networking service provider 51.com. The next-generation online game project has something to do with the integration of online games and communities. Shanda Interactive Entertainment Ltd. and Kingsoft Corp. have readopted time billing due to the disadvantages of micropayment games.

Technology

- Focus Media Holding Ltd. purchased a 51 percent stake in the 12580 information service of China Mobile Ltd., but was denied by the leading mobile carrier. Focus Media will return to the wireless service field through the acquisition. 80 percent of China's spam messages came from Focus Media, forcing the digital media operator to withdraw from the mobile advertising and wireless service fields. The 12580 information service is managed by the data division of China Mobile Communications Corporation. Its supporting service is provided by Beijing Umessage Co., Ltd. Everywhere around China, mobile phone users are able to check information relating to restaurants, entertainment, tourism, weather and traffic, and to book hotel rooms and air tickets by telephoning the 12580 service hotline.

- Focus Media expects to complete restructuring of its non-core businesses, involving at least five or six subsidiaries, in the fourth quarter. Focus Media upcoming third quarter will depend on the effects of restructuring. Focus Media will have its net revenue from continued operations, including Internet, movie theater and traditional outdoor advertising channels, lessen by about 40-50 percent in the third quarter. Focus Media now has about 10,000 to 20,000 fewer advertising frames compared with last quarter due to network optimization. Focus Media plans to maintain 70-75 percent overall market share and about 80-90 percent market share in excellent media resources, or media channels like high-rent office buildings.

Alternative Energy

- JA Solar Holdings Co., Ltd., appointed Mr. Yuwen Zhao as an independent member of its board of directors. The company's board of directors has accepted Mr. Huaijin Yang's resignation as vice chairman and board member.

- LDK Solar announced organizational changes to its management team. Mr. Xingxue Tong, President and Chief Operating Officer will temporarily take over all manufacturing operation functions, including polysilicon and wafer production, as a result of the resignation of Mr. Nicola Sarno, Senior Vice President of Manufacturing. Mr. Sarno will leave the Company on October 16, 2009 to pursue personal interests.

- ENN Solar Energy will have to invest 200 million yuan (US$29.3 million) to establish photovoltaic power stations in Qinghai and Gansu provinces with installed capacity of 2-5MW. ENN Solar will have to list in 2011 at the latest and has not yet chosen a location for the offering. ENN Solar will kick off a Hong Kong IPO as early as mid-2010.

- Comtec Solar Technology began offer subscriptions for an initial public offering on the Hong Kong Exchange. The company's global offering is no more than 250 million shares, including 25 million shares for the Hong Kong market priced between 2.1 yuan (US$.3) and 3.1 yuan (US$.4). Comtec had decided to reduce its issue by 17 percent.

- China Sunergy has appointed Siegfried Yi Chou Hsu as company Chief Financial Officer, effective immediately, the company said. Dr. Shiliang Guo concurrently resigned from his position as acting CFO, but will remain a company director. The company's previous CFO, Kenneth Luk, resigned effective March 31, 2009. Hsu most recently worked as vice president of structured finance and a chief advisor of the investment committee for China investment strategy at China Development Industry Bank in Taipei.

Semiconductor

- Intel Corp. will add US$75 million in its plant in Chengdu, the provincial capital of southwest China's Sichuan province, boosting the company's total investment to US$600 million. Intel will move the assembly and test plant from Shanghai to Chengdu, and finish the transfer by the end of November. The investment of Intel in Chengdu facilitated the settlement of related enterprises here as well, hence formed a comparatively complete industrial chain. Most of the enterprises the plant needs for operational procurement have settled their branches in Chengdu and west China. The plant expects to attract downstream manufacturers of computer and consumer electronics products to Chengdu as well.

Taiwan

- Chunghwa Telecom will spend around NT$30 billion (US$929 million) annually over the next two to three years to expand its fiber-optic network. The company expansion of network aims to meet the increase in demand. The telecom operator will have to add 10 million fiber-optic network subscribers through the expansion. Its current subscriber base is 15.1 million. Mobile broadband business will boom this year, with the number of subscribers expected to increase to 370,000. Chunghwa along with China Telecom will cooperate on a 60km undersea cable project across the Taiwan Strait. The company also paid NT$60 million (US$1.76 million) for a 30 percent stake in internet service provider and Sony subsidiary So-net Entertainment Taiwan, to use So-net's video distribution to add 550,000 new fiber-optic subscribers this year.

- Taiwan is considering easing controls on the technologies its flat-panel makers can use in their China operations, as South Korean and Japanese rivals have stepped up investments there. LCD panel makers will be able to use any technologies in mainland production as long as they use more advanced technologies in Taiwan. LCD panel makers in Japan and South Korea would invest in more advanced 7.5th- and 8.5th- generation technologies in China, posing a threat to Taiwan companies. The island had not considered allowing the island's LCD firms to make large panels on the mainland for now. This would only cautiously export its technology expertise to China. The ministry would allow chip makers and flat-panel firms to invest more in China, including using more advanced process technology for chips and allowing LCD firms to make large panels there, but gave no timetable.

- Acer Inc. recorded revenues of NT$167 billion (US$5.18 billion) and net earnings of NT$4.7 billion (US$145.96 million) for the third quarter of this year, up 40.3 percent and 54.6 percent respectively from the preceding quarter and both hitting historic high records. Acer's operating profit margin is 2.8 percent in the third quarter of this year, higher than 2.55 percent in the previous quarter. Acer has seen growth of operating profit margin for two consecutive quarters, showing the company is continually raising profitability in core-business operations. The company registered NT$3.45 billion (US$107.14 million) in after-tax earnings, or NT$1.28 (US$0.039) per share, in the third quarter of this year, up 47.4 percent from the previous quarter. It scored NT$7.82 billion (US$242.85 million) in cumulative after-tax earnings in the first three quarters of this year.

- Compal Electronics Inc. expects to ship more notebook personal computers this year than earlier forecast due to strong demand from Europe. The Taiwanese contract manufacturer of computers expects to now ship more than 36 million notebook PCs, higher than its earlier guidance of 35 million units. Replacement demand from desktop to notebooks is driving sales and fourth quarter notebook shipments are expected to rise 10 percent from the third quarter. Compal shipped 10.55 million laptops in the third quarter. The launch of Microsoft Corp.'s new operating system Windows 7, together with Christmas sales in the U.S. and Europe, are expected to boost demand for laptops as well.

- View International (PVI) hit record-high preliminary September revenue of NT$1.47 billion (US$45.23 million), up 9 percent month-on-month (MoM) and a 51 percent year-on-year increase. Third- quarter revenue had a new high of NT$4.17 billion (US$128.3 million), up 47 percent QoQ and 61 percent year- on- year due to the end-consumer demand growth and company's successful capacity expansion. E-paper products now already account for more than 50 percent of its overall revenue and the proportion would rise further due to continued strong demand. The second half is the peak season for e-paper products, so its 2.5th-generation (2.5G) plant in Taiwan and three lines at Hydis of Korea have been running at full-capacity production.

= Chairman Morris Chang of TSMC hoped sales next year would return to 2008 levels. Most analysts are optimistic on TSMC's business for 2010, as the foundry giant ramps up production of new chips using more efficient technology to win orders from foreign chip makers that are seeking to cut costs by stepping up outsourcing. TSMC is expected to post sales of NT$343.4 billion (US$10.7 billion) next year. Its sales was NT$321.8 billion (US$9.9 billion) in 2008. Third-quarter sales climbed by a fifth from the previous quarter, matching its own forecast, because of the growing chip demand.

Source: IRG
Sectors: Media & Marketing, IT Individual

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