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Wednesday, 2 September 2009, 10:11 HKT/SGT

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

HONG KONG, Sept 2, 2009 - (ACN Newswire) - The following is the China excerpt from IRG's TMT Weekly Market Review Aug 24 - Aug 30. 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).


- China reached a mobile phone export volume of 230 million in total during the first half of 2009, valued at US$16.08 billion, down 7.2 percent and 7.7 percent year on year respectively.

- China Telecom gained a net 2.45 million new mobile service subscribers in July. Its operator's total user number increased to 41.73 million. Broadband user base grew by 820,000 to total 49.87 million during the reporting period. Drawing an opposite path, its fixed-line service subscribers continued to lessened to 1.67 million to 197.69 million.

- China Mobile is expected to have up to 80 million 3G subscribers within the next two years. This is a tough call because China Mobile must use China's own TD-SCDMA standard. The 80 million is lower than the earlier number of 100 million subscribers. TD-SCDMA subscribers in China will reach 10 million by the end of this year. China Mobile plans to spend around US$8.6 billion during 2009 on rolling out its 3G network, deploying some 60,000 base stations in 238 cities in the process.

- China Unicom gained 680,000 mobile service subscribers in July. It boosted the total number of the carrier's mobile service users to 141.057 million. The telecom operator enjoyed a net increase of 814,000 broadband users, but lost 331,000 subscribers of its fixed-line services, falling to a total of 108.121 million.

- HTC Corp. and China Mobile Ltd. signed a memorandum of understanding and plan to launch one TD-SCDMA phone in 2009 and six in 2010. The companies will launch five phones in 2010. In order for the market to grow, prices of smartphones in China should decline.

- China Telecom has placed a 4-million 3G handset order with dozens of domestic mobile phone makers, the biggest such order ever in China. The multi-billion yuan order, which includes 63 different customized models, will greatly expand China Telecom's 3G handset portfolios and is expected to help it attract more users. The 4-million customized handsets China Telecom ordered, bigger than its original plan of 3.6 million, are mostly priced in the 1,000 yuan (US$142.9) range and some are priced as low as 500 yuan per handset, a pricing that analysts say will make it more competitive and affordable to more customers. The lack of 3G-capable handsets has been hindering the growth of the 3G services in the country.

- China Telecom Corp.'s CDMA handset sales jumped 345 percent year on year to 13 million units in the first half of the year. China Telecom has partnered with more than 160 CDMA handset manufacturers and that the total number of CDMA handset models has hit 350. In the first six months of this year, the combined sales of 3G handsets based on all three standards rose by 113 percent, led by EV-DO handset sales. Full-year sales of 3G handsets will reach 5 million units, with sales in the second half accounting for 90 percent of the total, predicted Ma. China's mobile phone market grew 7.3 percent year on year in the first half, when 80.41 million units were sold. The country is likely to have 130 million 3G users in 2012 and about 500 million in 2015.


- ZTE Corp. had better than expected results for the first six months, citing strong domestic order flows. Net profit jumped 40.54 percent to 783 million yuan (US$114 million) after revenue surged 40.44 percent to 27.7 billion yuan (US$4.05 million). The company did not declare an interim dividend. Stripping out 28.61 million yuan of extraordinary items, which included government grants of 30.63 million yuan (US$4.5 million) and 36 million in non-operating expenses, net profit jumped 38.31 percent. The results beat analysts' forecasts of 10 to 35 percent growth.

- Huawei Technologies had garnered a 10 percent share of Europe's telecommunications equipment market and expected to gain more ground this year. The Shenzhen-based firm was targeting a huge improvement in Europe this year, with a focus on wireless equipment. The company won US$3 billion in contracts out of the US$30 billion awarded in Europe last year, a 20 percent gain from a year earlier, with sales to all major operators, including Vodafone Group and Telefonica. Huawei also made a significant breakthrough in the U.S. The company's gains defy the trend in the industry, which has been hurt by falling demand and intensifying price competition. Its net income rose 20 percent to US$1.15 billion last year while its major rivals, Ericsson and Nokia Siemens Networks, suffered an almost 50 percent drop in annual profit, and Alcatel-Lucent's full-year loss widened 48 percent.

- Reliance Communications Ltd. and China Telecommunications Corp. will open their terrestrial cable link, which is the first between India and China. Bookings for traffic on the 300-kilometer cable are already in progress. Undersea cables to connect the two countries are already in place, but a land link will help reduce the risk from complete dependence on undersea cables. Traffic on undersea cables has been disrupted in recent times due to natural causes such as typhoons and earthquakes. A terrestrial cable link is also less costly to put up and maintain.

- China Mobile Ltd. will sign a bilateral cooperation agreement related to 4G technology with Taiwan's Industrial Technology Research Institute. The developing next-generation 4G technology is now in progress. The company plans to start testing of its 4G network next year.

- MediaTek Inc. and China Mobile Ltd. agreed to develop the TD-SCDMA wireless technology. MediaTek is still offering high-quality products and services to help China Mobile introduce China's homegrown TD-SCDMA wireless technology. In China Mobile's last two procurements of TD-SCDMA handsets and data cards, 60 percent of the products have chips developed by MediaTek.

- China Telecom Corp. had first-half profit decreased to 28 percent after the company increased spending to market its mobile-phone services. Net income declined to 8.41 billion yuan (US$1.23 billion) from a year earlier. The profit, which excluded gains from fees the company used to charge to install fixed lines. China Telecom boosted sales incentives and upgraded networks in its wireless business to close the gap on China Mobile. Costs may rise further as the nation's carriers step up marketing of high-speed services this year. First-half sales increased 15 percent, as revenue from China Telecom's mobile- phone division helped compensate for declining fixed-line income.

- China Telecom plans to launch a procurement meeting for buyers of CDMA cell phones without getting profits. The carrier's mobile terminal management center has informed its province-level branches, mobile phone agents, and manufacturers about the procurement meeting. China Telecom will put cell phone manufacturers face to face with distributors for negotiations, which may even result in on-the-spot orders. The tightest bottleneck the telecom operator faces is its inadequate cell phone models. China Telecom would focus on managing cell phones rather than sales.

Media, Entertainment and Gaming

- China online game developer NetDragon reported profit for the first six months of 2009 was down approximately 42.4 percent to 66.39 million yuan (US$9.7 million) from 115.19 million yuan (US$16.9 million) same period last year. NetDragon's revenues grew approximately 4.3 percent year-on-year to 336.77 yuan million (US$49.3 million) from 322.90 million yuan (US$47.3 million) in the same period last year, which the company attributed to the launch of self-developed a cartoon version of the turn-based online game Way of the Five, the company's crackdown on private servers for in-house developed 3D fantasy MMORPG Eudemons Online and the launch of several expansion packs during the period.

- Blue Mobile, on offline arcade game developer signed contract with Flyhigh Group to supply local arcade game. Flyhigh Group runs arcade game theme mall in 22 places including Shanhai. The company will have right to supply games from planning stage to final delivery if local developers meet the requirement proposed by Flyhigh Group. As a result, it will remove problem of illegal copy and circulation, the largest obstacle in advancing into China through Flyhigh Group. It will bring fresh air into local arcade game market, which is in downturn. The company is in process of assessing to provide 13 local arcade games with Flyhigh Group, so the contract will be done soon.


- SVA (Group) Co., Ltd., a troubled LCD panel maker in China, is likely to pick Wuhan Zhongheng New Science & Technology Industrial Group Co., Ltd. as the buyer for its loss-making 5G LCD panel production line. Tianma Microelectronics Co., Ltd. is losing interest in the production line after a sweeping investigation. Tianma Microelectronics, which offered 2.55 billion yuan (US$373 million) for the production line in the previous round of quoting, lowered its offer after completing the investigation on August 14. Such an offer-cutting will also lower possibilities for the Shenzhen bidder to take over the operation. The conscious pull-off, on the other hand, will probably push Wuhan Zhongheng Group closer to the seller and win out in the bidding with an offer of 2.8 billion yuan (US$409 million).


- Chunghwa Telecom Co. is seeking business opportunities in China and emerging markets as a part of its mid-term strategy. Chunghwa Telecom also issued its audited results for the first half, which were in line with the unaudited figures it issued in July. For the six-month period, total consolidated revenue fell by 3.7% to NT$97.2 billion (US$2.9 billion) from same period last year with net income decreased 4.2% to NT$22.3 billion (US$0.7 billion) given traffic for its fixed-line and mobile businesses was hit by the global economic slowdown and increased market competition.

- Lenovo Group plans to spend US$3.3 billion in Taiwan in the next 12 months buying laptops and equipment from companies including Hon Hai Precision Industry. The orders would be fulfilled in less than a year. Lenovo intends to buy computers, personal computer peripherals and monitors from nine Taiwan companies, including Quanta Computer, Compal Electronics and AU Optronics Corp. The amount is 22 percent higher than the US$2.7 billion announced by the council last week and more than 20 percent of Lenovo's US$14.9 billion revenue last year.

- The output of Taiwan's electronic components sector is expected to reach NT$174 billion (US$5.3 billion) in the third quarter this year, 20 percent higher than in Q2. The increase was due to the surging demand for Chinese bandit phones and for CULV (consumer ultra low voltage) notebooks sold by major vendors such as Acer, Asustek, Lenovo Taiwan and Dell. The sector's estimated output for 2009 will be 16 percent less than last year due to the global economic downturn. Local manufacturers will suffer a turn down in net earnings this year due to the economic slump. This has driven consumers toward cheaper low- and middle-end electronic products.

- Asustek is pinning its recovery hopes on emerging markets such as China as the pioneer of netbooks struggles to compete with bigger rivals such as Hewlett-Packard and Acer. Asustek will have a slew of product launches, set for the second half of the year, to help it stem the decline in revenue and profit margins, as it takes a beating due to the increasing popularity of low-cost netbook PCs. Netbooks have since been rolled out by other brands such as Hewlett-Packard, Acer and Dell, dealing a blow to Asustek. Nokia would start to make netbooks, entering a fiercely competitive but fast-growing market. Asustek swung to an operating profit in April-June after two straight quarters of losses, having laid off staff and slashed products to emerge leaner.

- Quanta Computer had stronger-than-expected growth, further boosting hopes that tech demand is returning as the global economy recovers. A key supplier to top brands such as HP, Dell and Apple, the company expects PC shipments to rise by over 20 percent in the current three months compared to the second quarter. The fourth quarter will also see similar sequential growth for PC shipments. Quanta had net profit of NT$4.9 billion (US$149 million) in the April-June quarter.

- DisplaySearch forecasts LCD TVs with LED backlights will make up 10 percent of the global market next year. LG, Sharp, Philips, Vizio and Toshiba are scrambling to introduce LED-type LCD TVs following Samsung. Industry executives point out that an LCD TV backlight requires 15 times more LED lamps than does a mobile-phone backlight and 20 to 30 times more than a notebook. Fierce competition in the TV market has prompted LCD-panel makers to open factories to make LED chips for LED backlight modules. AU Optronics has announced a plan to invest NT$30 billion (US$909 million) in four LED-chip factories. It has spent NT$2.5 billion (US$75 million) on 25 metal organic chemical vapor deposition chambers for the productions.

- Lite-On Technology Corporation has signed with Yingtan's city government in east China's Jiangxi province to co-establish a thin solar film power generation project for agricultural greenhouses. The company signed a previous deal with Jiangxi's Shangrao city to develop a solar power generation systems for five agricultural greenhouses, each with an installed capacity of 20 kilowatts. The system's investment budget totaled at five million yuan. Chinese government has set a new target of adding 20 GW of installed photovoltaic power generating capacity in the 10 years from 2010 to 2020, which means an increase of two GW for each year.

Hong Kong

- PCCW Ltd. Chairman Richard Li was refused to appeal the blocking of his buyout offer for the company because the application raises no issues of public importance, a court ruled. Hong Kong's Court of Appeal said there is no justification for an appeal as the government has already said it plans to review the takeover code. The ruling was the first explanation of its Aug. 18 decision to refuse applications by PCCW and Li's Pacific Century Regional Developments Ltd. Li dropped his HK$15.93 billion (US$2.06 billion) buyout bid in April after the appellate court ruled that shareholder votes were manipulated. PCCW and Pacific Century, which both denied any wrongdoing, may make a final appeal to the city's highest court to continue a legal battle with the Securities and Futures Commission over what is permissible under local takeover rules.

- PCCW planned against declaring an interim dividend because it paid out a special dividend of HK$1.30 (US$.17) per share two months ago. The company had flat earnings for the six months to June. Net profit was HK$654 million (US$84.3 million). Revenue rose 12 percent mainly because of a contribution from its property development at Cyberport. The company just spent HK$8.8 billion (US$1.1 billion) on the special dividend during the period. The special dividend came after the Court of Appeal rejected a HK$15.93 billion (US$2 billion) buyout deal launched by Mr Li's Pacific Century Regional Developments and China Unicom Group in April.
- Netel Technology, a long distance call services provider, reported net loss widened to HK$2.9 million (US$383,195) for the year ended May 2009. Its basic and diluted earning per share was HK$0.6 cents (US$.07). The revenue was HK$4.9 million (US$632, 202); with a gross profit of HK$2.2 million (US$290,297).

- COL, the information technology services arm of telecommunications operator Wharf T&T, has teamed up with Oracle Corp to deliver Hong Kong's first human resources process outsourcing. The new service, which is also available through COL's outsourcing centers in Guangzhou and Jiangmen in neighboring Guangdong province, will provide Oracle's PeopleSoft Enterprise Human Capital Management applications through subscription over the internet to companies. This software-as-a-service offering will automate traditional human resources areas such as payroll, payment and tax return processing, preparation of monthly transaction reports, recruitment and benefits processing. It is a market segment that is forecast to grow 11.2 percent annually from US$17 billion last year to US$29 billion in 2013.

- RDF Digital USA and Artificial Life, Inc. will have a collaboration to produce an interactive animated TV show entitled Sleuths. Implementing Artificial Life's innovative MoPA-TV(R) system, Sleuths will be the first television show in the U.S. to let audiences become part of the storyline. Artificial Life's MoPA-TV technology has been greeted with resounding success in Japan and across Europe. Now, RDF has created a format around the technology to bring it to the States for the first time.

- ET Net News Agency agreed to place 50 million placing shares on a best-effort basis apiece. The placing price represents a discount of 8.33 percent. The new shares represent 14.07 percent and 12.34 percent of the existing and enlarged issued share capital of the company. The HK$5 million (US$645, 112) net proceeds will be applied for general working capital and for potential future investment of the group.

Topic: Press release summary
Source: IRG

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

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