Chinas-telecoms-and-internet-market-update-BDA-Chi

CityBriefing–AnalysysMasonLondon,November24th2009DuncanClarkChairman,BDAChinaLimited©BDA20092•BDAprovidesstrategicconsultingandresearchtoleadingTMTfirmsandfinancialinstitutionswithafocusonemergingmarketsandnewtechnologiesinAsia.•ThefirstindependentTMTconsultancyinChina,established1994.Teamof50inBeijing.–BDA’steamofprofessionalshaspriorexperienceinstrategyconsulting,investmentbanking,telecomoperations,internationalpolicyandcorporateplanning.•ActiveinIndiasince2004,officeopenedin2006.Teamof16inNewDelhi.•BDAhasdedicatedanalystsorganizedaroundthreesectorgroups:•BDAprovidesthreetypesofservices:–Strategy&marketentryconsultingprojects–Investmentadvisoryservices–OngoingresearchthroughretainerHandsets/DevicesTelecomEquipment&ServicesInternet/NewMedia(TMT)Consulting&ResearchforAsia©BDA20093WhyChinamatterstotheworld...•Subscribers–already#1inworld–Mobile:From700milliontodayto1billionby2013,including200million3G–Internet:Fromc.330milliontodayto600millionby2013,including300millionmobileInternetusers•Revenues–hugeroomforgrowth–TelcorevenuesinChinain2008totaledc.USD120billion–stillfarbehindUSmarket(USD500billion),sothereremainssubstantialroomforgrowth•Capex–3Gaboominagloballydepressedenvironment–3GcapexwillgenerateoverUSD40billioninspendingincoming2-3years–Morewillbespentonupgrading2Gcapacityandfixedlinenetworks(ChinaMobilealonewillspendUSD33billionon2Gupgradesinnext2years)4…andwhytheworldmatterstoChina•China-basedequipmentvendorshaveglobalized–Huawei&ZTEgeneratemostoftheirrevenuesoverseas,squeezingmarginsoftheBig3Europeans(Ericsson,NokiaSiemensNetworks&Alcatel-Lucent).HuaweiwillsurpassAlcatel-Lucent&NSNthisyear.•Chinaisattemptingindigenousinnovation,butfacingchallenges–SofarTD-SCDMAhasnotliveduptoexpectations,eventheworld’slargesttelco(ChinaMobile)can’tdriveeconomiesofscaletocompetewithglobaltechnologieslikeW-CDMA•Insteadoferectingwalls,Chinawilltakeitsplaceatthetoptableinshapingglobalstandards–Evenifindigenousinnovationfails,China’sinfluencewillriseanywayduetoshifttoAsiaincriticalmassofsubscribers,vendors,innovation,IntellectualPropertygeneration5HuaweiwillovertakeNSNtobecome#2telecomequipmentvendorin2009.In1H2009itsawgrowthwhilerivalsdeclinedSource:Companyinformation,BDAUSDBillionYearRatio77%80%79%75%75%Huawei’sContractOrdersandAccountingRevenue*•HuaweireportedcontractordersworthUSD15.7billionin1H2009,upby28%YoY,whichissurprisinglyhighcomparedwiththe10-30%YoYfallspostedbyitsrivals.•However,BDAestimatesalowerratioofrevenueinitscontractordersduetocarriers’preferencefordeferredpaymentandlongtermcontract•HuaweiwouldnearitstargetofUSD30billionofcontractordersifitmaintainsthisgrowthin2H2009.8.79.913.16.17.08.513.36.5FY09RevenueForecastYoYGrowth26.4-12%18.421%15.7-26%12.6-22%Note:1.Ericsson’sforecastrevenuein2H09includesrevenuefromthenowacquiredNortelwirelessbusiness,whichisestimatedatUSD3billion.YoYgrowthratein1H2009was-12%.2,BDAestimatesHuawei’srevenuein1H2009basedonreportedcontractrevenueofUSD15.7billion.Vendors’RevenuefromTelecomCarriersin1H&FullYear2009USDBillion1Rev.in1H09ForecastRev.in2H096China’s‘Informatization’Drive•Informatization(n)-信息化“IfGodsparesme,IwillensurethatthereisnoworkingmaninmykingdomwhodoesnothavethemeanstohaveachickeninthepoteverySunday”HenryIVofFrance,1553-1610•Bandwidth(kilobit/person)•Phonecalls/person•Telephonelines/100people•CableTV/100people•PCs/1.000people•Broadcast&TVhours/1,000people•InformationIndustryas%ofGDP•…Source:ChineseAcademyofScience7BDAforecastsover1billionmobilesubscriptionsand645millionInternetuserswithin5yearsMillionNote:1)ThemobilesubscriberfigureisthenumberofactiveSIMcards;BDAestimatesthatuniqueusersrepresentaround70%ofthisfigure.2)Internetusersaredefinedasunique,individualusersaccessingtheinternetviawirelineand/orwirelessnetworks.3)Broadbandsubscribersmeansbroadbandserviceaccounts,mostlyheldbyhouseholdsorcompanies,ratherthanindividuals.Source:MIIT,CNNIC,BDAMobile,Fixed-Line,InternetandBroadbandSubscribers20082013F5-yearCAGR642104010%29864517%8820919%275121-15%69--8China’sIndigenousInnovationDrive:From‘Informatization’toProtectionism?Topdownpushfor‘indigenousinnovation’•TD-SCDMAChina3GstandarddevelopedbyDatang•AVSChinaaudiovideocodingstandard•WCDMA•CDMA2000EV-DO•MPEG4•H.264•WMV-9•WAPIChina’sWLANsecuritystandarddevelopedbyIwncomm•IEEE802.11i•RFIDChinaisdevelopingitsownRFIDstandard•ISO/IEC18000•EPCGlobal•UbiquitousIDCenter•CMMBChina’sMobileTVStandard•MediaFLO•T-DMB•IGRSIntelligentGrouping&ResourceSharing:China’sdigitalhomestandardSource:BDAImposingTD-SCDMAonChinaMobileasawayoflevelingtheplayingfieldforitscompetitors,butChinaMobileishardtoreininGSM(3GtechnologyisTD-SCDMA)CDMA1x(3GtechnologyisEV-DO)GSM(3GtechnologyisW-CDMA)EquityMarketCapUSD205billionUSD40billionUSD34billionSubscribers500millionmob18millionfixed39millionmob200millionfixed140millionmob108millionfixedMobiletechnology/pathwayGeographicconcentrationNationwideFixedlineinSouthFixedlineinNorth1011China’s3GCompetitiveLandscape2009-All3TelcosLaunched188186189Prefix#TD-S