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Thursday, 13 August 2009, 16:38 HKT/SGT

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

HONG KONG, Aug 13, 2009 - (ACN Newswire) - The following is the China excerpt from IRG's TMT Weekly Market Review Aug 3 - Aug 9. 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.


- Alibaba.com widens its loans with the signing of agreements with China Construction Bank (CCB) to expand its loan-assistance program to small companies in Hangzhou, Zhejiang province and Shanghai. CCB and the Shanghai, Zhejiang and Hangzhou governments will set up a reserve pool of 60 million yuan (US$8.8 million) in each region as a guarantee for the loans. Each loan under the Ali-loan program is at 2 million yuan (US$292, 706).

- Alibaba.com is planning to establish a joint venture in India to provide business-to-business e-commerce services. The new Indian firm will be similar to the joint venture Alibaba.com set up with Japanese mobile telephone and Internet company Softbank. The Japanese joint venture caters to local small and medium firms. An assistance program launched in 2007 by Alibaba.com's parent. Alibaba Group has helped around 1,400 small and medium-sized enterprises in China's Zhejiang province obtain loans in excess of 2.6 billion yuan (US$380.3 million) as of June 30. While the non-performing loan ratio among commercial banks in China was 1.77 percent as of June, the ratio on the so-called "Ali-loans" for the same period was 1.08 percent.

- Ctrip.com International recorded its second quarter profit of 159 million yuan (US$23 million), up 33 percent year-on-year and 31 percent sequentially. Total revenues were up 26 percent annually and 18 percent higher quarter-on-quarter to US$69.73 million, its highest net revenue record in recent years. Hotel reservation revenues contributed 227 million yuan (US$33 million), up 16 percent year-on-year and 21 percent quarter-on-quarter, while air-ticketing revenues grew 32 percent annually and 20 percent sequentially to 222 million yuan (US$33 million). The company attributed the growth to increasing reservation/sales volume, offset somewhat by decreasing commission rates. Packaged-tour revenues hit 36 million yuan (US$5 million), up 51 percent on an annual basis, but sliding 5 percent from the previous quarter. H1N1 flu had had an impact to the company, as well as seasonality factors.


- Hewlett-Packard and Foxconn International Holdings have agreed to jointly invest US$3 billion to develop a laptop personal computer manufacturing hub in Chongqing with a production capacity of 20 million units a year. The manufacturing base will be fully operational in 2012 with most of the computers being exported to European markets. The project, together with other complementary sectors, would have an industrial output worth up to 400 billion yuan (US$58.5 billion) by 2012, or 25 percent of Chongqing's industrial output, which would see the information technology and electronics sectors outpace the car and motorcycle industry as the biggest industry in the city. The global financial crisis and cost-efficiency pressures are driving major technology manufacturers to redeploy their China operations from the country's coastal areas to inland region.

- Pypo China Holdings Limited has entered into a definitive agreement to acquire Shanghai Xieheng Telecommunications Equipment Co., Ltd. Xieheng operates over 200 mobile phone retail stores in Shanghai, Chongqing, Guangdong, Shandong, Jiangsu, Zhejiang, Anhui and Hunan provinces in China. After the completion of the acquisition, Pypo will operate a nationwide mobile communication product retail network of nearly 430 retail stores in over 14 provinces and 80 cities in China. The acquisition will significantly increase the size of Pypo's retail sales establishing it as the largest mobile phone specialty retailer in China in terms of sales volume. Pypo will acquire 100 percent of the equity interests in Xieheng, including all interests that Xieheng holds in certain of its controlled entities in China, for approximately US$46.8 million plus the value of the net assets of Xieheng as of July 31, 2009, all in cash. The value of the net assets of Xieheng as of July 31, 2009 is estimated to be no more than US$1.46 million. Subject to the completion of Xieheng's internal restructuring and other customary closing conditions, the transaction is expected to close in the fourth quarter of 2009.


- China Unicom says commercial trials of its 3G mobile service will expand to 168 more cities next month as its network catches up with rivals. The company, which began its 3G mobile service in May, has continuing commercial trials in 100 cities, bringing the total to 268 cities offering 3G services next month. The newly added cities are in 18 provinces, including Anhui, Fujian, Guangdong, Hebei, Heilongjiang, Hunan, Liaoning, Sichuan and Yunnan. Unicom has budgeted 110 billion yuan (US$16.1 billion) this year for mobile network expansion. The company, which was late in deploying its 3G network across the nation, is catching up with China Telecom Corp in network coverage. China Telecom offers its 3G mobile service in more than 300 cities. China Mobile has a network covering 38 cities.

- China Unicom Ltd. plans to cooperate with three Taiwanese telecommunication companies in areas including third-generation mobile Internet and content services. Zhao Jidong, vice president of China Unicom, arrived in Taiwan and will meet executives from Taiwan Mobile Co., Chunghwa Telecom Co., and Far EasTone Telecommunications Co. China Unicom and Taiwan Mobile will discuss laying an undersea cable connecting Tamsui in Taipei County and Fuzhou in China's Fujian province as well as other undersea cables.

- China Mobile Ltd. will launch a smartphone powered by Google. The 3G OPhone will run on Google's Android operating system and is made by Lenovo Mobile. China Mobile will subsidize about half the cost of the OPhone for its prepaid and contract customers. China Mobile will also launch a version of HTC Corp.'s Magic smartphone at the same time, which also runs Android.

Media, Entertainment and Gaming

- China exported more than 30 online games to over 20 countries and regions in 2008 to earn overseas revenue of US$71.78 million, up 30.5 percent year-on-year. Perfect World generated revenue of 209 million (US$30.6 million) from game exports, representing 35 percent of China's total game export revenue. NetDragon had 21.9 percent. Kingsoft booked 15.5 percent. Nineyou took in 14.6 percent; and Shanda earned 7.3 percent. 15 China companies had exported a total of 33 in-house developed games in 2008 to earn overseas revenue of US$70.74 million, up 28.6 percent year-on-year.

- NetEase's in-house developed Q-style MMORPG recorded an average of 2.39 peak concurrent users (PCU) for 3 days specifically on July 5, August 2 and August 3, 2009.

- Giant Interactive hopes to release at least four new games in the second half of 2009. In-house developed MMORPGs King of the Kings 3 and Xiantu Online and webgame Golden Kingdom will be the first games that Giant releases in the second half. The company will launch its in-house developed sequel to ZT Online, ZT Online II, at the beginning or in the middle of the fourth quarter. In-house developed 3D MMORPG Long Hun ("Dragon Soul") is likely to launch in the first quarter of 2010. The company is developing seven games. Giant planned to start first-round alpha testing of ZT Online II in the third quarter. The company planned to start alpha testing of Long Hunsoon.

- Tencent announced that its in-house developed Q-style 3D online car racing game QQ Speed recorded 700,000 peak concurrent users and has more than 119 million registered gamers.

- China's television direct shopping is seeing a growth in demand after two years of decline, according to Acorn International. The company recorded a 251 percent increase in net profit to US$8.5 million for the first quarter of this year as revenue surged 37.3 percent to US$90.7 million. The company posted a net loss of US$25 million as revenue fell 4.37 percent to US$250 million. Growth in television direct shopping soared after it was introduced on the mainland in 2000, especially in the five years to 2007, when the market was worth 10 billion yuan (US$1.5 billion). More than 100 companies were offering goods on television, with about 33 percent of them including Acorn operating nationally and the rest regional players. Other well-known companies included China Seven Star, Hunan-based HappiGo and Shanghai's Oriental CJ Home.

- Perfect World announces the introduction of its first 2D real-time fantasy MMORPG, "Dragon Excalibur." The upcoming launch of the new game 'Dragon Excalibur' is an important part of the strategy of diversifying the portfolio of games. Perfect World has been dedicated to providing a variety of innovative games to cater to a wide range of players with differing interests.

- Chenggong Multimedia, a Ningbo-based online entertainment company, has licensed 3D fantasy MMORPG Shin Megami Tensei from Japan's Cave Online Entertainment for its mainland China operation. The company plans to release the game by the third quarter of 2009.


- CDC Software Corp., which focuses on enterprise software for midsized businesses, sank in early trading on its first day as a public company. A total of 4.8 million shares were sold at the midpoint of the expected price range, which was set by underwriters Lazard Capital Markets and JMP Securities LLC. The stock opened at $12 a share on the Nasdaq, flat with its initial public offering price, and lost 17% by the close of trading.


- Semiconductor Manufacturing International Corp (SMIC), citing strong orders, will maintain double-digit revenue growth for the third quarter sequentially and a higher capacity utilization rate. However, one analyst noted that revenue at the mainland's largest contract chip maker was still not enough to enable it to show a profit. The company posted 82.5 percent revenue growth to US$267.4 million in the second quarter over the first. This beat analysts' forecasts of US$264 million, thanks to stronger than expected shipments to communications and consumer customers. The recovery in the semiconductor industry in the past three months was mainly due to a rebound in customer demand across all regions. Greater China revenue was up 87.4 percent in the period, while North America rose 85.3 percent. SMIC's management hinted that revenue will grow 14 to 18 percent this quarter sequentially and it is receiving orders for September. It is also cautiously optimistic about fourth-quarter performance.

Alternative Energy

- QS Solar's sales price for a-Si thin-film cells has reached US$1/watt, the lowest price in the global industry. The market's target price would be US$0.80 to US$0.85/watt in 2011 and US$0.65/watt in 2012, at which time QS Solar's cost to manufacture thin-film cells will drop to US$0.5/watt. A 1MW power station constructed with QS Solar's thin-film modules and integrated facilities would require investment of less than US$2 million, excluding installation fees and land costs.

Hong Kong

- PCCW Ltd. will buy BPO Holding Co., the call center unit of Philippine technology firm IPVG Corp., for US$22 million. PCCW will hold 70 percent stakes in U.S.-based call center company Interactive Teleservices Corp. and BPO Teleservices Inc. of the Philippines after the acquisition. Interactive Teleservices and BPO Teleservices serve customers in the banking and finance, information technology, consumer electronics, and travel sectors.

- Shareholders in Hutchison Telecommunications International Ltd. will potentially receiving a hefty dividend payout. Scailex Corp. had submitted a bid to acquire control of Hutchison Telecom's 51 percent-owned Partner Communications Co. Ltd. The company didn't disclose a bid amount, even though analysts value the 51 percent of Partner. Hutchison Telecom will use the dividend to finance the capital needs of its unprofitable mobile-phone operations in emerging markets such as Indonesia, Sri Lanka, Vietnam and Thailand. Hutchison Telecom, which owns Hong Kong and Macau mobile operations in separately listed Hutchison Telecommunications Hong Kong Holdings Ltd., last reported full-year earnings in March, posting a sharp fall in 2008 net profit as its year-earlier earnings were boosted by a large one-off disposal gain. Telecom may put some of its other assets on the block, or even sell all the assets in one piece.

- Comtec Solar Technology plans to raise US$100-150 million through a public offering launched in Hong Kong in the fourth quarter of 2009. The company will submit a listing application in August. Comtec Solar produces 125mm and 156mm wafers and has a conversion rate of 17 percent.

Topic: Research / Industry Report
Source: IRG

Sectors: Media & Marketing, Electronics, IT Individual
From the Asia Corporate News Network

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