电信服务业.pdf

25 June 2008China Telecom industry12nd Lowest in the Meaningful Areas;Barely Higher Than Global AverageRussia?Wireless penetration:83.6%of global sub:5.5%?Wireline penetration:28.0%of global sub:3.2%Japan?Wireless penetration:79.3%of global sub:4.7%?Wireline penetration:43.1%of global sub:：4.4%China?Wireless penetration:34.8%of global sub:21.1%?Wireline penetration:28.1%of global sub:29.2%India?Wireless penetration:14.8%of global sub:7.9%?Wireline penetration:4.3%of global sub:3.9%Euro Area（incl.UK）?Wireless penetration:116.5%of global sub:18.3%?Wireline penetration:53.4%of global sub:15.6%USA?Wireless penetration：77.4%of global sub:10.7%?Wireline penetration:57.4%of global sub:13.6%Brazil?Wireless penetration:52.9%of global sub:4.6%?Wireline penetration:20.5%of global sub:3.1%Global AverageWireless penetration:33.6%Wireline penetration:19.6%Source：ITU,World Bank,CIA Factbook CICC researchData in year 20062Wireless Penetration basically In Line With GDP per Capita?Wireless penetration is 35.3%in 2006 in China;Wirelinepenetration is 28.1%in 2006 in China?Wireless penetration is 41.6%in 2007 in China;Wirelinepenetration is 27.8%in 2007 in China?To be consistent with global data,we choose Chinas data in 2006 to compare.Actually,only two privincesincluding Anhui and Guizhouswireless penetration were below 25%till 2007.HebeiTian jinShandongJiangsuAnhuiZhejiangShanghaiFujianGuangdongHKTai wanHeilongjiangJilinLiaoningInner MongoliaXinjiangTibetQinghaiSichuanYunanGuizhouGuangxiHainanHunanJiangxiHubeiHenanGansuShanxiNingxiaShanxiBeijingChongqingWireless penetration country averageWireless penetration 25%Wireless penetration 25%Source：MII，CICC researchData in year 200634561712072352472502592723903302722472061731.681.511.051.011.001.321.10015030045060075020012002200320042005200620070.91.11.31.51.7移动收入固网收入移动对固网收入比例Inevitable Mobile Substitution1.802.142.633.123.503.683.651.452.062.703.353.934.515.4701234562001200220032004200520062007固定电话用户移动电话用户Growth rate of mobile subscriber were about two times of the growth rate of fixed line from 2001,and fixed line subscriber turned out of negative growth in 2007 for the first time.bnCAGR=24.8%CAGR=12.5%During the 7 years,mobile industry revenue has increased from similar to fixed-line in 2001 to 1.68X in 2007bnXSource：MII，Company data,CICC ResearchMobile penetration growth in China0%10%20%30%40%50%60%70%80%90%100%1991199319951997199920012003200520072009E2011E2013E2015E2017E2019EChinese mobile subscriptionpenetration41%in 2007infectionrange7%in 2000Fixed line subsmobile subsmobile Rev.wireline Rev.Mobile rev/wireline rev4Industry Estimate:Subscriber Enlarged,Revenue Increased steadily0%25%50%75%100%125%150%020,00040,00060,00080,000100,000120,000140,0002001年各省渗透率2006年各省渗透率2020年各省渗透率线性(2001年各省渗透率)线性(2006年各省渗透率)线性(2020年各省渗透率)Penetration%GDP/capitaSource：MII，National Bureau of Statistics of China，CEIC，CICC research0%25%50%75%050,000100,000150,000200,0002001年各省渗透率2006年各省渗透率2020年各省渗透率线性(2001年各省渗透率)线性(2006年各省渗透率)线性(2020年各省渗透率)Penetration%GDP/capitaWireless penetration expected to be 80%in 2020Mobile subscriber increased further,fixed-line subscribers would not decrease significantlyFixed-line penetration expected to be stable at around 20-25%in 2020Industry revenue increased steadily-2004006008001,0001,2001,4001,6001,8001998199920002001200220032004200520062007 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020ERmb bn0%1%2%3%4%Telecom industry revenueTelco rev as a%of GDPTelecom industry revenue growth in line with the growthrate of nominal GDPPenetration 2001Penetration 2006Penetration 2020Linear penetration 2001Linear penetration 2006Linear penetration 2020Penetration 2001Penetration 2006Penetration 2020Linear penetration 2001Linear penetration 2006Linear penetration 20205Broadband:Chinese addressable broadband marketBroadband and Data business is a promising resort for fixed-line operators inflection point0%5%10%15%20%25%30%35%40%45%50%200320042005200620072008E2009E2010E2011E2012E2013E2014E2015E2016E2017E2018E2019E2020EChinese internet users penetrationChinese broadband users penetrationChinese broadband subscription penetration210.2mn163.4mn693mn679mn245mnAbout 3 users translateinto 1 broadbandsubscriptionStill likely to be too conservative;as we made the same mistakes inforecasting mobile users years agoinflection range66.5mnSource:CICC ResearchWe expect Chinas total number of internet users&broadband subscriptions to double in 3 years and triple in 9.Still low compared to many countries current levels of internet penetration(80%)or broadband subscription penetration(30%).Please refer to our recent report:“China Broadband Addressable Market Analysis”6Still large industry upsides;provide room for“win-win”Source:CICC Research0%10%20%30%40%50%60%70%80%90%100%-10,00020,00030,00040,00050,00060,0000%10%20%30%40%50%60%70%80%90%100%-10,00020,00030,00040,00050,00060,0000%10%20%30%40%50%60%70%80%90%100%-10,00020,00030,00040,00050,00060,0000%10%20%30%40%50%60%70%80%90%100%-10,00020,00030,00040,00050,00060,000trend-line of year 2000trend-line since 200733 provinces/cities in 200033 provinces/cities in 200733 provinces/cities in 202033 provinces/cities in 2010Penetration rate moves up not onlyalong the trend line with GDP/capgrowth;but the trend line itself canactually move up over time(e.g.from 2000 to 2007)mobilepenetrationGDP/cap(RMB)Year2002200320042005200620072008200920102011201220132014201520162017201820192020 Nominal GDP(Rmb 100mn)119,096 135,174 159,587 184,739 211,808 246,545 284,759 321,920 362,627 403,533 447,730 490,968 537,077 580,861 626,965 669,244 713,207 755,372 798,964Nominal GDP YoY(%)10.2 13.5 18.1 15.8 14.716.415.513.112.611.311.09.79.48.27.96.76.65.95.8Real GDP(Rmb 100mn)base yr=1978 32,728 36,001 39,637 43,760 48,617 54,159 60,117 65,527 71,425 77,139 83,310 89,142 95,382 101,105 107,171 112,529 118,156 123,473 129,029Real GDP YoY(%)9.110.010.110.411.111.41199887766554.54.5Inflation Rate(%)1.13.58.05.43.65.04.54.13.63.33.02.72.42.21.91.71.61.41.3 Population(mn)1,285 1,292 1,300 1,308 1,314 1,294 1,300 1,308 1,316 1,324 1,331 1,337 1,342 1,346 1,351 1,355 1,360 1,366 1,371 Nominal GDP per Capita(Rmb)9,272 10,460 12,277 14,129 16,113 19,049 21,899 24,615 27,547 30,488 33,647 36,729 40,020 43,149 46,419 49,376 52,424 55,307 58,259Total Telecom Revenue(Rmb 100mn)3,341 4,377 5,017 5,723 6,400 7,111 7,935 8,667 9,381 10,010 10,501 11,103 11,715 12,308 12,862 13,378 13,892 14,422 14,986 -%of nominal GDP(%)2.813.243.143.103.022.882.792.692.592.482.352.262.182.122.052.001.951.911.88Potential Revenue Accretion from FMC/Bundling services(theanother 30%upside we assigned to CT)(Rmb 100mn)823 819 837 855 893 941 991 1,048 1,121 1,198 1,279 1,366 1,460 -%of nominal GDP w/FMC synergy(%)2.813.243.143.103.022.883.082.952.822.692.542.452.372.302.232.182.132.092.06Telecom ARPU(Rmb per month)22 28 32 36 41 46 51 55 59 63 66 69 73 76 79 82 85 88 91We expect mobile penetration to grow from 40%today to over 90%in 2020-terminal year with GDP/cap forecast of US$7,800.Still 1/3 of provinces with penetration rate below 30%and GDP/cap around US$1500.Value-added service at primary level-Data,FMC&bundling“start from zero”.7“Win-win”in the industrys 2 battlefields:Low-end fully competitive market and high-end still monopoly marketSource:CICC ResearchStill large industry potential+Rational competition tacticsHigh-end MarketLow-end Market Cut-throat competition Abnormal pre-restructuring morale/incentive&regulation Still monopoly market:higher tariff,ARPU&MOU,Major contributor of revenue&profit High entry barrier:high-end users are pickier;preparation and implementation competence needed to cut inOne industry,two battlefields Leader retaliates fast and fierce,whose per minute tariff is 20-40%lower;sales forces are 3-5x stronger Harsher competition will lead to harsher/asymmetric regulation Followers maintain rather low market share and grow along with the market Leader leaves certain mkt share for the followers to avoid asymmetric regulation Leader cant afford to cut tariff across the board,where it dominates and generates most of its profit Followers limited by capacity and ability unable to gain much by too-aggressive price warring,but may lose profitability and force leader to fight back Leader still reaps most profit by keep the tariff stable instead of initiating price war Followers nibble small pieces from the leader makes leader worse off by forcing it to fight back;small pieces each time is good enough for the followerPrice warsNo price wars Leader retaliates fast and fierce,per minute tariff is 20-40%lower;sales forces are 3-5x stronger;and gains subsidies from high-end mkt Harsher competition will lead to harsher/asymmetric regulationStill large industry potential+Rational competition tacticsHigh-end MarketLow-end Market Cut-throat competition Abnormal pre-restructuring morale/incentive&regulation Still monopoly market:higher tariff,ARPU&MOU,Major contributor of revenue&profit High entry barrier:high-end users are pickier;preparation and implementation competence needed to cut inOne industry,two battlefields Cut-throat competition Abnormal pre-restructuring morale/incentive&regulation Still monopoly market:higher tariff,ARPU&MOU,Major contributor of revenue&profit High entry barrier:high-end users are pickier;preparation and implementation competence needed to cut inOne industry,two battlefields Leader retaliates fast and fierce,whose per minute tariff is 20-40%lower;sales forces are 3-5x stronger Harsher competition will lead to harsher/asymmetric regulation Followers maintain rather low market share and grow along with the market Leader leaves certain mkt share for the followers to avoid asymmetric regulation Leader cant afford to cut tariff across the board,where it dominates and generates most of its profit Followers limited by capacity and ability unable to gain much by too-aggressive price warring,but may lose profitability and force leader to fight back Leader still reaps most profit by keep the tariff stable instead of initiating price war Followers nibble small pieces from the leader makes leader worse off by forcing it to fight back;small pieces each time is good enough for the followerPrice warsNo price wars Leader retaliates fast and fierce,per minute tariff is 20-40%lower;sales forces are 3-5x stronger;and gains subsidies from high-end mkt Harsher competition will lead to harsher/asymmetric regulationLow-end mkt is already over competitive:Followers avoid price war as CM can cut into their cost.CM cant fight further before triggering asymmetric regulation.Current competition is overdue as regulation is abnormally loose in“waiting for restructuring”.High-end mkt is still monopolized by CM:CTs ability and preparation make it able to slice small pieces(and only small pieces)gradually.CM is unfavorable to fight back in its dominantly controlled mkt for small mkt share loss.8New China UnicomFixed line+GSM+WCDMANew China TelecomFixed line+CDMA+CDMA2000China MobileGSM+TD-SCDMAVendorsWeak supply-side powerSP/CPsUse to be weak,may have higher bargaining power going forwardVery High Entry Barrier due to strict regulationLarge country;hard for network build-up and salesMobile substitutionMobile substitutionDatasubstitutionPost-Restructuring Industry Landscape9China Mobile（941.HK）History中国移动（香港）集团有限公司CHINA MOBILE(HONGKONG)GROUP CO.LTD.中国移动有限公司*CHINA MOBILE CO.LTD.中国移动香港（BVI）有限公司CHINA MOBILE HONGKONG(BVI)CO.LTD.199719981999200020012002200320042005200620072008China Telecom(Hong Kong)Limited incorporate d in HKRaised US$4.2 bn in IPO,listed on the NYSE and HKBrought into HSI index in JanAcquired Jiangsu MobileEquity offering of US$2 bn and global notes of US$600 mn due 2004Acquired Fujian,Henan and Hainan MobileChanged name to China Mobile(Hong Kong)LimitedOffered equity(US$6.865 bn),convertible notes(US$690 mn);raised RMB12.5 bn loansAcquired 7 provsIssued RMB5 bn of corp.bonds in China,which listed on the Shanghai Stock Exchange.Acquired 8 provinces.issued a further RMB8 bn in aggregate of corp.bonds in ChinaThe RMB 8bn corp.bonds were listed and trading on the Shanghai Stock Exchange.Acquired the other 10 provinces,China Mobile Communic ation co.Ltd and Beijing P&T Consulting and Design Institute LtdMade a voluntary conditional cash offer for all the issued shares of China Resources Peoples Telephone Co Ltd.Acquired&privatized Peoples Changed name to China Mobile Limited.Build a long-terms strategic alliance with News Corp.and STAR Group Ltd.Acquired Paktel-the 5th operators in PakistanHeld 10-years listing anniversary in NYSE and HKExTD trial commercial ized in 8 citiesExecute roaming ceiling Established unified overseas brand“ZONG”Chairman：Shi CuimingChairman:Wang XiaochuChairman:Wang JianzhouMilestone of China Mobile since listingShareholding Structure of China MobileSource:Company data,CICC researchMobile Information Expert74.33%公众投资者Public Shareholders 25.67%10New business expanded Source:Company data,CICC research23%26%2%3%6%10%16%21%0%5%10%15%20%25%30%20002001200220032004200520062007New business as a%of total revenueAs a%of total revenueRevenue distribution in 2007 of China MobileChina Mobile Revenue DistributionUsageMonthlyVASInter-connection6%26%5%63%SKT Revenue DistributionUsageMonthlyVASInter-connection30%27%10%33%NTT DoCoMo Revenue DistributionVoice revVASPHS&Other29%3%68%China Mobile VAS ARPU16.619.423.024.224.6-51015202520032004200520062007VAS ARPU11Optimize and Improve Revenue-drivingProductsRevenue ScalePositioning ServiceMobile TVMobile PaymentMobile GamingMobile MailboxMMSColor RingWAPSMSCaller IDMobile PaperFetionCentral Music DownloadWireless Music ClubGrowth Products to Surpass Important ThresholdWireless AdvertisingDevelopment Focus on PotentialProductsMobile SearchSubscriber ScaleExpress News12580In 40 billions:SMSIn 10 billions:Caller ID,Mobile Music,WAPIn billions:MMS,Mobile Gaming,Weather ForecastMore than 100 provincial-level products with good marginal benefits,e.g.mobile secretary,over-the-air recharging,etc.Abundant Applications to Meet Different DemandsValue-added Business A Stratified Product Reserve for Sustainable Development12Value-added Business Non-SMS Data Business Shows Vibrant Development*As of August 2007*As of September 2007Wireless music club members:53mn*,monthly growth rate 16.2%Paid subscribers:21mn*,grew strongly at nearly 2.5mn per monthSubscribers grew rapidly at 6mn per month,exceeding 50mn*Mobile Music“Mobile Paper”“Fetion”Co-operate with banks,railway,chain stores,etc.Mobile Securities TradingMobile PaymentMobile TVRevenue:RMB 5bn in 1H2007,up 90.3%YoYColor RingWAPMMSRevenue:RMB 4.4bn in 1H2007,up 45.8%YoYRevenue:RMB 0.7bn in 1H2007,up 76.0%YoYSubscribers around 590K*Work with CCTV,SMG,CNR,CRI&other well-known mediaRevenue-driving productsGrowthproductsPotentialproducts13Rural Market Effective Strategy Delivers Significant Contribution2007.32007.617.8220.1024.822006.1212.8%23.5%Rural market contributed significantly to ou