2001
2002
2003
2004
2005
2006
2007
2008
73M 327M
482M
PHS Fixed Mobile
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WTO opens up mkt • Support local telecom vendor industry/ R&D/Manufacturing base • Telecoms equipment purchases major role in US trade relations
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2 Copyright © 2004
Since WTO foreign influence has been muted….
• No major joint ventures (AT&Ts still only one) • Complex, vague regulatory landscape, “designed” to thwart foreign
involvement • Basic penetration high> low hanging fruit gone • Foreign infrastructure involvement in China highly unlikely
• Involvement in low key VAS, small scale ….but best opportunity
1,000 900 800 700 600 500 400 300 200 100
HH%
69%
65% 61% 57% 52% 46%
China Cellular Connections
Cellular Connections (M) 600 500 400 300 200 100
(Millions)
3 Copyright © 2004
0% 10%20%30%40%50%60%70%80%90%100%
China Fixed an
MobiFliexed
China Telecom Penetration
Eastern Sea-board
Source: MII (May 2004)
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2001 2002 2003 2004 2005 2006 2007 2008
20012002200320042005200620072008
Adjusted for SIM duplication (M)
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Audio Teleconference
20th July 2004
Agenda for Today
China
• 1.3 bn pop • 357 m HH • US$53 bn FDI
(2003) - OECD • Per capita income
US$1000 • 2001 ..64m above
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AAnnddrreeww CChheetthhaamm,, PPrriinncciippaall AAnnaallyysstt,, AAssiiaa PPaacciiffiicc TTeelleeccoomm,, HHoonngg KKoonngg
• International carriers serving MNC’s making incremental progress • From NNIs…..to full POPs in gateway cities …..to POPs deeper in
China. • Investment restricted to support of MNC clients
US$5000… • 1 dollar earned is
60cents spending discretionary spend • GDP 2003 growth 9.4%
Telecom Issues
Govt/WTO Potential
Fixed Mobile
3G Carriers
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• Maintain control of the industry (eg use of price controls) • Tap foreign capital without giving up control • Dominance of home market - defence against foreign involvement as
2003 531M 41.1 lines per 100 people
2008 882.5M
66.3 lines per 100 people
5 Copyright © 2004
Fixed and Mobile Markets
China Fixed-Line Household Addressable Users (M) & Household Fixed-line Penetration Rate (%)
1 Copyright © 2004
Overall Government Telecom Agenda
• Tele-density / Telecom drives economic growth / global competitiveness
• Affordable + available communications • Improve quality - drive new services - drive china as innovation hub
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Internet access
40
• Corporate Networks
35
Proprietary
30
25
• Broadband Revenues
40
30
20
CHINA:
10 0 2002 2003 2004 2005 2006 2007 2008
BIG GROWTH, BUT LOW REVS
Fixed Business CAGR 2004 - 2008 - 5% Consumer CAGR 2004 -2008 - 10% Total CAGR 8.2%
4 Copyright © 2004
How Big is the Potential Market?
Connections (Millions)
China's Telecom Connections 2001 - 2008
1000 900 800 700 600 500 400 300 200 100 0.0
Mobile Pre-Paid: CAGR 2004 -2008 - 8.2% Post-Paid: CAGR 2004 -2008 - 2.7% Total CAGR 2004 -2008 - 4.6%