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Friday, 26 June 2009, 22:00 HKT/SGT

Source: IRG
IRG Technology, Media and Telecoms Weekly China Market Review

HONG KONG, June 26, 2009 - (ACN Newswire) - The following is the China excerpt from IRG's TMT Weekly Market Review June 15 - June 21. 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) sectors.


- Hisense Electric plans to raise as much as 1.5 billion yuan (US$219 million) by private placement of up to 150 million shares in order to fund further expansion into upstream segments of liquid-crystal display (LCD) television manufacturing. The share offer would target both institutional and individual investors at no less than 10.83 yuan (US$1.6) per share. Proceeds from the placement, which has yet to be approved by the China Securities Regulatory Commission (CSRC), would be used for boosting production capacity in LCD modules and flat-panel television sets. After the expansion, production capacity of LCD modules, a key component for flat-panel television sets, would jump from 1.5 million units to 6.5 million. The manufacturing of LCD modules, which usually makes up about 70 percent of the cost of the final product, has been an area of intense competition for domestic television makers. Hisense had attempted to issue additional shares to raise 1 billion yuan to fund an LCD module expansion project in April last year, but the CSRC vetoed the effort for reasons not fully clarified.


- Beijing Municipal Government rolled out an informatization infrastructure plan, aiming at transforming the city into an information hub and Internet center. The municipal government expected to absorb rolling investment of 100 billion yuan (US$14.6 billion) for the construction of the informatization infrastructure by 2012. To promote related industries' investments of about 200 billion yuan, Beijing plans to take the lead in building the urban-rural integrated high-speed broadband information networks during the implementation of 3G construction. As of the end of May 2009, Beijing boasts 10.4 million internet users, 8.8 million fixed-line phone users, 17 million cell phone users, and four million broadband access service subscribers.

- MySpace.cn announces that its operations will not be affected by the layoff plan of its parent MySpace. MySpace's Chinese venture lacks the popularity its parent in the US has seen in the past years. Some believe that MySpace has encountered a setback in its expansion in the Chinese market. In the second half of 2008, Luo Chuan, former CEO of MySpace.cn, joined China Mobile Ltd., MySpace.cn's operating director went to work for Huawei Technologies Co. Ltd., and MySpace.cn's marketing director and product director left their posts as well. In June 2009, it was reported that Myspace planned to cut 30% of its jobs. Even in the US the company faced a big challenge from archrival Facebook. In May 2009, Facebook's user growth doubled from a year ago, while MySpace's user base lessened 5 percent.

- Sohu.com Inc. announced the introduction of a 3G channel, based on the company's media platform, which will act as a dedicated broadcaster of 3G-related information for users. Sohu will provide some basic information services, such as a 3G map and product trials, through its 3G channel. The company registered the domain 3g.sohu.com for the channel. It was disclosed that the 3G channel would cooperate with Sohu's entertainment channel to offer an entertaining and fashionable experience to users. The new channel will join hands with Sohu's sports and financial channels.

- Sina Corp. said online advertising sales would rebound as property and vehicle clients increased spending, after reporting a 31 percent drop in quarterly profit because of a decline in revenue. Third-quarter advertising sales were expected to increase from the current quarter. Still, the year-on-year comparison is challenging. First-quarter advertising sales fell 9.8 percent from a year earlier, prompting the company to freeze some rates to retain clients, and first-quarter net income dropped to US$9.75 million from US$14.1 million a year earlier. Advertising sales fell to US$43.2 million from US$47.8 million.


- An industry insider reveals that China Unicom will continue the first phase of 3G construction in the remaining 229 cities, after it launched the first batch 3G trial commercial operation in 55 cities in May. The telecom service operator plans to finish the network construction in the 229 cities by the end of this year, and will have the cities capable of providing services in September, when the cell phone numbers will be released. China Unicom's second batch network construction will cover the country's major prefecture-level cities, while its first batch construction was mainly arranged in the provincial capitals and developed cities. Its first phase 3G network construction will cover China's 284 cities with 78,600 base stations established. Key cities and important regions will enjoy complete coverage of China Unicom's 3G network signals.

- Investment by mainland telecommunications network operators so far this year has exceeded last year's total because of the deployment of the 3G mobile system. State-owned operators China Mobile, China Unicom, and China Telecom Corp have substantially boosted network investment since Beijing issued 3G licences in January. The increased investment is mainly due to the roll-out of new 3G networks, such as Unicom's deployment of a network covering more than 300 cities this year. China Telecom had opened the tender for the second phase of its CDMA network, which could extend its coverage to more than 500 cities. Beijing estimates the operators will spend more than 300 billion yuan (US$43.9 billion) on 3G deployment. Unicom had previously said it would spend 100 billion yuan (US$14.6 billion) on network infrastructure alone this year, while China Telecom plans to spend 80 billion yuan over three years.

- China Mobile Ltd. obtained approval from Taiwan's Far EasTone Telecommunications Co (FET) to buy a 12 percent stake in the company, sources reported. Shareholders of FET approved the issuance of up to 444 million new shares valued at NT$17.7 billion (US$537 million) to China Mobile to fund mergers and acquisitions or to invest in new business. China Mobile is planning to set up a wholly-owned subsidiary in Taiwan to handle the share transaction. The deal, which still needs regulatory approval, is expected to be the first direct investment by a mainland state-owned company on the island in six decades. China Mobile and FET jointly announced the proposed deal in late April. China Mobile, which just began offering 3G services in mainland China, has been seeking to expand overseas and to enhance its services. The company's first-quarter net profit grew 5.2 percent.


- The China Telecom Group signed a long-term strategic cooperation agreement with northwestern China's Shaanxi Province to accelerate the information industry in the province. China Telecom Group agreed to invest 20 billion yuan within five years in the construction of Shaanxi's communications infrastructure to strengthen its comprehensive information service capability. The telecom giant plans to put four billion yuan into Shaanxi this year to improve the quality of wire and wireless wide band services in the province. It will stretch the coverage and utilization of its rural information network in Shaanxi, a large agricultural province, in an effort to narrow the distance of rural residents within the market and reduce the economic risks for them in operating farm products.

- JPMorgan buys 31.04 million shares in China Telecom at HK$130 million (US$16.8 million). According to the data of the Stock Exchange, has acquired 31.04 million shares, 0.22 percent issued share capital, of China Telecom, at HK$4.19 (US$0.54) apiece.

- ZTE Corp. is likely to secure the biggest contract in China Mobile Ltd's third round of bidding to supply TD-SCDMA wireless equipment, sources reported. ZTE is likely to win a 36 percent share of China Mobile's equipment purchases, while Huawei Technologies Co Ltd and Nokia Siemens Networks may win a combined share of 30 percent. Datang Telecom Technology Co Ltd is expected to obtain an 18 percent share. China Mobile, the country's largest telecom operator, is expected to announce the bidding results soon. The telecom operator this year aims to build 85,000 TD-SCDMA base stations in 238 Chinese cities. It currently owns TD-SCDMA base stations in 38 cities in China, and has 514,000 3G network subscribers.

- The China Unicom Group will invest 40 billion yuan (US$5.85 billion) in Henan province in the next five years on its 3G mobile network and fixed-line broadband transmission infrastructure. The investment is part of a strategic alliance China Unicom Group has reached with Henan to enhance the province's information technology infrastructure. The company is spending 3 billion yuan this year building 7,000 WCDMA 3G base stations across the province. About 1,863 base stations have been undergoing trials since last month. The company will also increase its broadband internet connectivity bandwidth and optimize the network infrastructure in Henan. Analysts believe the massive investments made by telecommunications operators on the mainland will directly benefit equipment vendors such as ZTE Corp. Unicom chairman Chang Xiaobing said such investment plans could help the local economy face the challenges of the tough economic environment.

Media, Entertainment and Gaming

- Chinese digital advertising company Focus Media Holding Ltd reported a narrower-than-expected quarterly loss, and forecast sequentially higher revenue for the second quarter. The company said it would cease expansion of its digital poster frame network in light of uncertain demand. Focus Media posted a net loss of US$5.7 million, or US$4 cents per American Depositary Share, compared with a net loss of US$53.8 million, or US$42 cents per ADS, a year ago. Net revenue from continuing operations fell 14 percent to US$66.7 million, while that from discontinued operations fell 23 percent to US$64.4 million. Analysts on average had expected the company to post a loss of 5 cents a share, according to Reuters Estimates. For the second quarter, the company expects revenue from continuing operations of US$69 million. Net revenue from discontinued operations is expected to be US$81.5 million.
- UTStarcom Inc. will focus on IPTV solutions in China. China and India serve as two major markets for UTStarcom. While centering its business on broadband in India, the company would prioritize the development of IPTV solutions and related products in China. The company would take initiatives to concentrate its resources on specific business areas, services and markets. It will develop differentiated products with leading technologies to boost revenue and gross margin. The company recently announced plans to downsize global headcounts by over 50 percent and cap annual operating expenses below US$100 million. The company has set about to move its functional departments in the US headquarters to China. It will retain about 2,000 staff for major markets including India and China.

- Advertising and consumer spending in the mainland's media and entertainment industry will probably grow 7 percent this year and next. Despite the global downturn, the mainland will still manage to see a 2.15 percent gain in advertising revenue this year, to US$20.6 billion. Global advertising revenue was expected to fall 12.1 percent this year and rebound to a 1.4 percent increase in 2011. Video games and the internet were expected to be the leading growth engines on the mainland, with spending expected to grow at a compound rate of 15 percent and 13 percent, respectively, this year and next. Spending on digital music and outdoor media would increase 7.5 percent during the period, the study estimated. Revenue from digital media would account for 39 percent of the total in 2013, up from 28 percent last year. PricewaterhouseCoopers' global leader of entertainment and media practice, Marcel Fenez, said media companies needed to expand their digital operations, as more and more users were getting content online than by traditional means, such as printed and broadcasted media.

- Perfect World announced that it has updated its revenue guidance for the second quarter of 2009. Due to stronger than expected ramp-up and traction of the newly launched "Battle of the Immortals," especially in the past month, and better than anticipated results from recently launched expansion packs on some of the existing games during the second half of the quarter, the Company now raises its revenue guidance to be between 489 million yuan (US$71.5 million) and 510 million yuan (US$74.6 million), which represents a sequential increase of 15 to 20 percent. This compares to the previously announced sequential guidance of a 2 percent decline to a 2 percent increase in revenue.

- Shanda Games has secured an exclusive operator agreement for Japanese online game company Cyberstep's 3D fighting casual online game Get Amped II and 3D shooting casual online game Cosmic Break in China, according to 17173.com. Shanda currently operates Cyberstep's 3D online casual fighting game Get Amped.

- According to reports in local Chinese media, The9 Limited is seeking to cooperate with Kingsoft Limited to extricate themselves from the predicament their in after losing World of Warcraft. Once they come to an agreement, the9 Limited will be a partner in operating the new knight-errant MMORPG "Jianxia Online 3" which is produced by Kingsoft Limited in China. There are currently no official announcements or other details available.


- Longtop Financial Technologies Limited, has signed a contract to upgrade the Customer Relationship Management (CRM) system for the headquarters of a leading National Commercial Bank in China. It was first selected by the customer to develop a customized CRM system in 2008 to improve the quality of client services and increase business efficiencies. In the phase-two project, the company will implement data mining techniques and new analytical functions will be added, including performance appraisal, unified view of customer profile, customer analysis and decision making, statistical inquiry and reporting.

Alternative Energy

- Yingli Green Energy Holding Company Limited (Yingli) a Chinese vertically integrated photovoltaic ("PV") product manufacturer, announced that its follow-on public offering of 18,600,000 American Depositary Shares (ADSs), each representing one ordinary share of Yingli, was priced at US$13.00 per ADS. Of the 18,600,000 ADSs sold in the offering, 15,600,000 ADSs were sold by Yingli Green Energy, and 3,000,000 ADSs were sold by a selling shareholder, Yingli Power Holding Company Ltd., a company beneficially owned by the family trust of Mr. Liansheng Miao, the chairman and chief executive officer of Yingli Green Energy. The offering was increased from its initial announced size of 15,500,000 ADSs. Yingli Green Energy has granted the underwriters an option to purchase up to 2,790,000 additional ADSs to cover over-allotments. The company intends to use the net proceeds from the offering, after deducting underwriting discounts and offering expenses, to repay certain existing indebtedness, including repayment of approximately US$50.0 million in a loan facility provided to its subsidiary, Yingli Energy (China) Co., Ltd., by Asia Debt Management Hong Kong Limited, and for general corporate purposes. Deutsche Bank Securities Inc. (as Global Coordinator), Credit Suisse Securities (USA) LLC and Citigroup Global Markets Inc. are the joint bookrunners and underwriters for the offering. Piper Jaffray & Co. is the co-manager for the offering.

- LDK Solar Co., Ltd., in an alliance with China Nuclear Power Engineering Co. and the Belgian Enfinity, has won the bid for China's Dunhuang photovoltaic (PV) station project. They won the bid at the price of 1.09 yuan/kwh and inked a 25-year contract. The station is in the pilot production phase. Despite that the enterprises can hardly make profits with the tender price now, their profits are expected to be on the rise as the PV station's mass-scale development will gradually cut down power generation costs. Dunhuang PV station, as a national exemplary project, will surely be connected to a grid for power generation.


- Semiconductor Manufacturing International Corp. (SMIC) said demand in the country for its products was recovering, and orders in the third quarter would be better than the second. China's 4 trillion yuan (US$585 billion) stimulus package is spurring domestic demand for chips used in televisions, mobile telephones and other electronic products. Increased sales on the mainland might help SMIC post an annual profit next year. The firm reported losses for each of the past four years. New orders in December last year fell to 20 percent of September levels. Demand began to increase in January and became very strong in March and April. China became the world's biggest buyer of chips in 2005 as Nokia and Sony produced more mobile telephones, gaming consoles and other electronics in the country. Chip sales on the mainland may decline to US$63 billion this year from US$73 billion last year. Sales might rebound to US$70 billion next year. Increased consumer demand had led the chipmaker's clients to restock, fuelling orders for SMIC. Clients, which usually keep six weeks of inventory, reduced their stockpiles to two weeks in December.

Information Technology

- Despite the economic slump, mainland information technology and financial services companies are pushing ahead with key investments in Britain, with an eye to accelerating their expansion across Europe. Initiatives from Huawei Technologies, Alibaba.com, China Central Television, China Mobile, Crystal Digital Technology, China Construction Bank Corp and China Merchants Bank were just the cream of 59 new mainland projects in Britain in the past financial year to March. Britain's international business development and promotion group ranked China as the eighth-largest source of foreign direct investment during a strong year in which Britain saw a record 1,742 new projects from 53 countries, up 11 percent from the previous financial year.


- Chunghwa Telecom Co. has signed an agreement with Yahoo Inc. to launch the search engine's mobile Web service in Taiwan. Yahoo said its mobile Web service is now available in 17 markets in Europe, Asia and the Americas.

- Powerchip Semiconductor Corp said a majority of investors holding its US$158 million convertible bond had accepted its offer to reset the terms of the bond, which matured last week. Powerchip proposed a cash and equity swap plan, seeking to attract more investors to agree to convert the bonds at a lower share price, as the company's share price has fallen sharply during the memory chip sector's worst-ever downturn. Under the original terms, bondholders could start converting the bond issued five years ago into Powerchip shares at NT$20.17 (US$.612) each from June 17. The new tender will allow investors to covert the bonds into more Powerchip shares at a lower price. The conversion price will be based on Powerchip's average closing price in the five trading sessions during June 19-25, 2009. Powerchip will offer bondholders US$400 in cash and another US$600 worth of shares for every US$1,000 principal.

- MediaTek Inc. recently cut its foundry contracts for the third quarter by 30 percent, up from 10 percent, due to a downturn of handset market demand in mainland China. MediaTek is currently the biggest cellphone-chip supplier in the mainland. Industry watchers pointed out that the mainland's handset demand has been on the decline since the May 1 Labor Day. They said that although the mainland's handset market revived earlier than the markets in any other countries, the growth pace has not been as significant as the mainland's other government-subsidized segments. The moderate mainland market for mobile phones has also promoted Qualcomm to announce that its shipments of chips would likely recess in the third quarter. From past market records, chip vendors usually increase foundry contracts to pure manufacturers in the third quarter in preparation for the mainland's fourth-quarter shopping holidays. So far this year, the mainland handset market has departed from past traditions.

Hong Kong

- TPV Technology is seeing overall orders improve amid rising demand for flat-panel television sets. The company's first-quarter net profit tumbled 67.2 percent year on year to US$14.88 million, but beat brokerage CIMB's estimate of US$12.7 million. Revenue fell 42 percent to US$1.379 billion. CIMB expected TPV's earnings to resume growth from the fourth quarter on stabilizing flat-panel prices, cost-cutting, and rising demand. The business suffered as firms cut spending on information technology in the quarter. Research firm Display Search said global demand for LCD monitors would decline 4.2 percent year on year to 160 million units this year and could remain flat next year. TPV's first-quarter overall shipments fell 7.3 percent to 11.4 million units, while LCD monitor sales slid to 9.8 million units from 11.4 million units, but LCD television sales almost doubled to 1.5 million units. Firm demand for LCD television sets in North America and Europe could generate 30 percent of group revenue by year-end, up from 25.5 percent in the first quarter.

- VTech Holdings would expand its operations outside its key market of North America. The company is seeking to boost its exposure in the Asia-Pacific region and other regions such as South America, where sales have been less affected by the global financial crisis. The company announced a new three-year contract to supply fixed-line phones to Australian telecommunications giant Telstra Corp, its first direct presence in that country. VTech reported a 33.6 percent decline in net profit for the year to March, down to US$143.2 million on a 6.7 percent drop in revenue to US$1.448 billion. It declared a final dividend of 41 US cents per share, down from 51 US cents. North America contributed 53.4 percent of VTech's revenue in the financial year. Revenue generated there fell 11 percent to US$772.8 million. Sales from the Asia-Pacific dropped 1.6 percent to US$55.2 million but contributed only 3.8 percent of the group's revenue.

- Tencent Holdings Ltd.'s chief technology officer Zhang Zhidong sell 1 million shares on June 16, 2009 at HK$89.3 (US$11.5) apiece. Through the deal, Mr. Zhang recovered over HK$89 million (US$11.4 million) in cash and decreased his stake in the Chinese online and mobile value-added service provider from 4.1 percent to 4.05 percent. From May 26, 2008 to January 5, 2009, Tencent Chairman and CEO Ma Huateng sold over HK$600 million (US$77.4 million) worth of Tencent shares. Martin Lau, Tencent's president, cut his holdings to 0.62 percent on May 12, 2009 via the sale of 200,000 shares, valued at HK$15.9 million (US$2.05 million) in total. Other senior executives of the company have also cashed in on share sales recently. However, Mr. Ma said that his stake cut was based on personal needs, instead of his pessimism about the company's prospect. Tencent announced that these deals were related to its strategy.

- Tencent Holdings is interested in listing its shares on the mainland. The company hopes to provide a channel for its 411 million mainland users to buy its shares, although it has not set a timetable. It could be better for red chips, which refer to mainland firms registered overseas, to list on the mainland before other foreign companies. Tencent is registered in the Cayman Islands. The company had no immediate plans to reduce the size of the board lot on the exchange. Tencent, the country's largest instant message service provider by number of active users, has branched out to other internet value-added services, such as online games and social networking communities.

Topic: Corporate Announcement
Source: IRG

Sectors: Fashion & Apparel, IT Individual, Wireless, Apps
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