Journalist China

Business news from China By Doug Young.
Doug Young, journalist, has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies.

He is based in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.
He contributes regularly to a wide range of publications in both China and the west, including Forbes, CNN, Seeking Alpha and Reuters, as well as Asia-based publications including the South China Morning Post, Global Times, Shanghai Daily and Shanghai Observer

News Digest: March 2, 2012 报摘： 2012年3月2日

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The following press releases and media reports about Chinese companies were carried on March 2. To view a full article or story, click on the link next to the headline.

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◙ Piper Jaffray (NYSE: PJC) Plans to Stay Independent After China Buyout Report (English article)

◙ Hong Kong’s First Major IPO of 2012 Falls on Debut (English article)

◙ Huawei Reaps Profits As Private Equity Investments Start to Go Public (Chinese article)

◙ WorldPay to Become the Largest China UnionPay Online Acquirer Outside of China (Businesswire)

◙ Tencent (HKEx: 700) Acquires European Gaming News Firm ZAM Network (English article)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)

Price War Brewing for iPhone in China iPhone价格战料在中国打响

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I’ll end my postings for this first day of March on a lighter note, looking at an entertaining marketing and price war that looks set to break out between China’s second and third biggest telcos, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), as the latter prepares to start selling the iPhone 4S later this month, breaking Unicom’s monopoly on iPhone sales in China since Apple (Nasdaq: AAPL) started selling the popular smartphones in 2007. In a highly anticipated announcement, China Telecom, the smallest of China’s 3 major telcos, said last month it would start taking orders for the iPhone 4S on March 2, and start selling the model for use on its network on March 9. (previous post) That development broke Unicom’s 3-year monopoly on iPhone sales in China, just a couple of months after Unicom itself started selling the 4S. Unicom has been rather lazy during the last 3 years during its monopoly period, failing to aggressively market the iPhone even as sales of the smartphones were one of its few bright spots as it suffered with internal management and operational issues. Now that the honeymoon period is finally finished, Chinese media are reporting that Unicom’s Guangdong unit is preparing a “stealth” attack to try to draw more iPhone buyers to its service even as China Telecom gets set to offer its own aggressive packages. (Chinese article) According to the report from a local publication in southern Guangdong province, Unicom’s Guangdong subsidiary is preparing to offer new incentives in the form of extra memory to new iPhone subscribers who are referred by Unicom’s current iPhone customers. I would expect to see similar moves from Unicom subsidiaries in other provinces in the next few weeks, as they attempt to stop China Telecom from stealing both new and existing iPhone customers. China Telecom is likely to fight back with its own aggressive new packages and other incentives, meaning the next few months could be a very good time for anyone considering an iPhone 4S to sign up for service. On a more serious note, this kind of war could undermine both the top and bottom lines for Unicom and China Telecom. It could also seriously hamper efforts by China Mobile (HKEx: 941; NYSE: CHL), the country’s leading mobile carrier, to bring some momentum to its own laggard 3G network, which suffers from a technological disadvantage as it is based on a homegrown Chinese technology standard with numerous problems. In summary, look for a colorful and also bruising price and marketing war between Unicom and China Telecom in the months ahead, playing to the advantage of 3G cellphone subscribers but bringing a new round of potentially destructive competition to the the telcos.

Bottom line: A new price and marketing war will break out as China Telecom prepares to end Unicom’s monopoly on the iPhone in China, resulting in profit erosion for both.

Related postings 相关文章:

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ China Telecom 3G Drive Set For Boost With iPhone 4S 中国电信3G推出电信版iPhone 4S

◙ China Telcos In New Drives at Home, Abroad 中国三大电信运营商海内外发力

Yingli Results: Rescue En Route From China? 英利财报：来自中国政府的营救？

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Despite the many clouds dampening prospects for China’s solar firms, Yingli Green Energy (NYSE: YGE) has just come out with a quarterly earnings reports that looks surprisingly optimistic about the year ahead, leading me to wonder if it has been told that China intends to announce some plans for major new solar power plants in 2012. The actual report looks the same as other companies that have already reported their fourth-quarter results, showing sharp drops in both revenue and profit as many firms took big write-offs related to the plunge in prices last year that has driven everyone into the red and forced a number of overseas players into bankruptcy. (results announcement) But what caught my attention was Yingli’s forecast for a hefty 50 percent sales increase this year, with the company expecting to ship 2.4 to 2.5 gigawatts worth of solar modules in 2012, up from last year’s 1.6 gigawatts. That forecast looks quite surprising since Yingli and its other Chinese rivals are facing big challenges in both the US and Germany, 2 of their biggest markets. Chinese solar cell makers are likely to face punitive tariffs in the US this year following an anti-dumping investigation, while Germany has taken recent steps to sharply cut back its incentives for new construction of solar power plants. So where does Yingli see such a jump in demand coming from? My suspicion is that Chinese officials may be quietly informing Yingli and China’s other major solar companies to expect major new orders at home this year, as the country starts to execute Beijing’s plans announced last year to embark on a multibillion-dollar campaign to build new solar plants. (previous post) In fact, Beijing sent a previous signal in the same direction last week when media reported that the government was urging solar companies to sharply boost their capacity (English article) despite the current downturn that has seen prices fall by 50 percent or more over the last year, driving share prices for many companies down to all-time lows. Yingli’s own shares now trade at $3.74, including a 4 percent drop after it announced its results, off their all-time lows from last fall but still at a third of where they traded a year ago. If and when the big orders from China start to come, look for Yingli and other top domestic players like Suntech (NYSE: STP) and Trina (NYSE: TSL) to be major beneficiaries, while smaller players will also get some new business but perhaps not as much. Whether the new China business will be enough to support Yingli’s ambitious 2012 target is still a big question. But at least for now I would be cautiously optimistic that a strong turnaround could be on the horizon for the battered sector by the end of the year.

Bottom line: Yingli’s forecast for a 50 percent rise in sales this year despite the solar sector’s current downturn indicates a China-fueled rebound could be on the horizon.

Related postings 相关文章:

◙ Beijing Boosts Solar In Latest Mixed Signal　中国扩张太阳能行业发展 解决与美争端立场混乱

◙ US Congress Turns Up Heat in China Solar Debate

◙ Suntech Cleans House As Rebound Nears 光伏行业或年中回

Bank of China Sees Gold in Global Commodities Trade 中行赴全球商品市场淘金

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I often write about China’s banks collectively as a group, as there’s little to differentiate them from one another in their home market where they act mostly the same, taking all their orders from Beijing. But it’s a different story on the global stage, where Bank of China (HKEx: 3988; Shanghai: 601988) is making some recent interesting moves to position itself as a key intermediary in China’s growing participation in global commodities markets as its resource firms expand their activities abroad. In the latest move on that front, Bank of China has formed a tie-up with US-based CME, the world’s largest operator of futures markets, according to a domestic media report. (English article) The tie-up will allow Bank of China to act as an agent for buying and selling of futures contracts on all of the CME’s markets, allowing it to serve a growing number of Chinese resource firms that are likely to tap into those markets as Beijing gradually allows them to expand their activities abroad. Most of China’s resource companies are now limited to trading on China’s domestic futures markets, which are largely closed to foreigners and don’t always fully reflect global trends. Bank of China signed a similar contract with the London Metals Exchange (LME) last month, giving it similar rights to trade on Europe’s biggest metals exchange, showing it intends to be a serious player in this potentially lucrative market. (English article) Perhaps most intriguing in this pair of new deals are comments by a Bank of China official in the latest CME agreement saying the bank wants to eventually offer yuan-denominated settlement services on the CME’s exchanges, which could be attractive not only to Chinese companies but also to the growing number of foreign firms who do big business with China. As a Chinese bank, Bank of China would have a natural advantage in offering yuan-denominated services over foreign rivals, giving it a lucrative niche market with lots of potential. This push looks similar to what ICBC (HKEx: 1398; Shanghai: 601398), another of China’s big 4 banks, is trying to do with its own big push to offer yuan services overseas, including providing yuan for a small group of nations that want to add the currency to their foreign exchange reserves. (previous post) These kinds of moves, while probably encouraged by Beijing as part of its broader push to internationalize the yuan, are one of the few things that differentiate the big banks from one another for stock buyers trying to decide which bank they like best. That said, revenue from international markets is still just a tiny part of the total business for all of China’s banks, though it certainly provides an interesting indicator of where each sees its future growth prospects.

Bottom line: Bank of China’s aggressive move into global commodities trade will position it as a major intermediary as China’s resources companies become more active abroad.

Related postings 相关文章:

◙ Bank of China Considers Offshore I-Banking 中国银行考虑收购RBS投行资产

◙ Beijing’s Financial Shufflle: Bankers or Regulators? 中国金融高层“大换血”

◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益

 

China Mobile Steps Up 4G Drive 中移动4G网络建设提速 年底或推商用试点

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There’s quite a bit of telecoms news coming out this week from the city of Barcelona in Spain, where China’s telcos and equipment makers are all showing off their latest wares at the world’s biggest annual telecoms show. Most of it looks like the usual display of new gizmos and gadgets, but the item that caught my eye was a relatively detailed update on China Mobile’s (HKEx: 941; NYSE: CHL) 4G plans, which indicate that both the company and, perhaps more importantly also the government, are moving aggressively forward to build a commercial network based on a homegrown Chinese standard called TD-LTE. Equally significant is who was discussing the plans, as the comments came from a relatively youthful Li Yue, a fast rising star who recently took over as president of China Mobile’s state-run parent, rather than the company’s longtime aging Chairman Wang Jianzhou, who is getting set to retire. Li said China Mobile will move ahead with plans to expand its large-scale trials of TD-LTE to 9 cities later this year, adding Qingdao, Tianjin and most importantly Beijing, to its current trails in 6 major cities that began last year. (English article) He went on to say that the fast-growing trial network could even be ready for commercial service in the cities of Shenzhen and Hangzhou by the end of this year. Li said the handful of telcos building commercial TD-LTE networks outside China, most notably Softbank (Tokyo: 9984) in Japan and Bharti Airtel (Mumbai: BHARTI) in India, are slowing down their plans until China Mobile can bring more momentum to the standard by working with networking equipment and handset makers to develop more products and clean up technological problems. Those remarks imply that not only China Mobile, but also the government, are working hard to speed up deployment of a full-scale commercial TD-LTE network in China, as Beijing is especially keen to see a China-developed standard compete globally alongside other standards developed in the US and Europe. In one other major development in that direction, Li disclosed that Qualcomm (Nasdaq: QCOM), one of the world’s biggest chipmakers for both cellphones and telecoms equipment, has agreed to develop chips based on the standard, providing more momentum for its development. On top of all those developments, I also like the fact that Li is now speaking for the company on this issue, as he represents a younger, more aggressive generation of new leadership that China Mobile needs to breathe life back into its stagnating top and bottom lines. All these latest signs say that despite some recent delays, China Mobile’s 4G plans are moving ahead at a fast and steady pace, helped by important government support, with some first-stage commercial service potentially starting to roll out in a few cities as soon as the end of this year.

Bottom line: New comments from a top China Mobile executive indicate its 4G plans are accelerating with government support, with limited commercial service possible as soon as year end.

Related postings 相关文章:

◙ China Telcos In New Drives at Home, Abroad 中国三大电信运营商海内外发力

◙ China Mobile: Improvement Ahead Under New Leaders 新领导有望助中国移动复苏

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

BYD Sputters Back to Life 比亚迪新车型助其重整旗鼓

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After seeing its business tumble starting in the second half of 2010 and through much of last year, former high-flying car maker BYD (HKEx: 1211; Shenzhen: 002594) may finally be seeing its business stabilize and even bounce back a little as it returns to basics by developing popular new models even as it pushes ahead with its ambitious green car program. The Warren Buffett-backed company has just released preliminary full-year results that, while difficult to interpret too deeply, appear to show the company is back on a growth track after more than a year of falling revenue and plunging profits that nearly saw it fall into the loss column. (earnings announcement) According to the results, the company’s full-year revenue was essentially flat, while its profit dipped 44 percent. Those numbers don’t sound too exciting on the surface, but they mark a huge improvement over the company’s results for the first half of last year, which saw revenue drop 11 percent and profit plunge 88 percent. So the latest numbers seem to indicate that BYD is once again posting healthy double-digit revenue growth and that profits may also soon return to the growth track. Of course, it’s not difficult to post both revenue and profit growth when you’re comparing your latest numbers to very weak year-ago ones, which is the case for BYD. But at least worried investors should be slightly encouraged by the results, which appear to show a bounce-back after BYD rolled out some much-needed new models  last year to replace its fast-fading F3, once one of China’s top selling cars that later ran out of gas. (previous post) BYD is putting big hopes in particular on its S6, an SUV co-developed with Germany’s Daimler, that may have posted a record 16,000 unit sales in January, accounting for more than half of its sales for the month after its launch less than a year ago. I do find it a bit ironic that BYD is relying on gas-guzzling SUVs to revive its fortunes, since it loves to tell the world how its future lies in energy saving green vehicles that it is strongly promoting but which so far have only found customers from mostly government buyers trying out the technology on a trial basis. But when you’re struggling to survive, you can’t afford to be too selective about how you do it. In the meantime, investors do seem to be excited about this early reversal of fortune, bidding up BYD’s Hong Kong shares by nearly 50 percent this year — though its price is still well below the highs it reached after Buffett originally invested in the company.

Bottom line: BYD is showing early signs of a rebound after a year of plummeting sales and profits, but needs to keep developing more new models to keep the comeback alive.

Related postings 相关文章:

◙ Car Sales: Domestics Down, But Not Out 汽车销量：国产车下降，接近拐点

◙ BYD Gets Back to Basics

◙ BYD’s New EV Plan: Hook Them With Investment 比亚迪拉美电动车之路堪忧

Sina Gets Serious on Weibo 新浪开始严肃对待微博

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After months of frustration for investors, Sina (Nasdaq: SINA) has finally laid out a detailed plan for how it will earn money from Weibo, with company executives forecasting the highly popular but unprofitable microblogging service will produce “meaningful” money by the second half of this year. Investors clearly liked what they heard, bidding up Sina’s shares by 12 percent in New York trading the day after CEO Charles Chao made his comments on a conference call to discuss Sina’s otherwise unimpressive fourth-quarter results. (English article; results announcement) I’ve had a glance at the plan, and it looks like a mixed bag of some things that are likely to work and some that probably won’t. In the first category, the most promising part is Sina’s plan to sign up enterprise customers and launch an ad display system on Weibo, which now boasts more than 250 million users. (English article) These 2 approaches look smart because they both target business customers, who are probably quite happy to pay big bucks for a chance to reach Weibo’s millions of users. Less interesting are Sina’s plans to roll out a growing number of paid services for Weibo users, including paid gaming services. In one of its few previously announced Weibo monetization initiatives, Sina said in January it would offer a premium version of Weibo for users who wanted to pay for extras like getting SMS mobile phone notifications when they received new posts to their accounts. (previous post) That announcement was greeted with mostly yawns, as everyone, myself included, knows it’s very difficult to get people to start paying for services that they’ve previous gotten for free — especially the big majority of Weibo users who are under 30 and don’t necessarily have lots of cash to spend. Of course, execution will be key in all of this, as it’s easy to say you’re going to target enterprise customers but not necessarily as easy to create products that those customers will want. Facebook has been quite successful at making this transition, though the road has been less smooth for Twitter, the global microblogging giant. In China the story is the same, with Baidu (Nasaq: BIDU) a clear leader at monetizing the huge traffic that flows through its search engine while local Facebook equivalent Renren (NYSE: RENN) has had more difficulty. Given Sina’s long history and relatively strong record at executing this kind of strategy, I would say its chances of making some significant money from Weibo by the end of this year are good. If that happens, I would look for an IPO of this high-profile unit as soon as mid-2013.

Bottom line: Sina’s plans to target corporate customers to monetize its Weibo service looks like a smart move, though plans to get money from ordinary users look more problematic.

Related postings 相关文章:

◙ Sina Tests Weibo Demand With Paid Offering 新浪试水微博增值收费服务

◙ Twitter Eyeing China? Twitter想进中国？

◙ Sina’s Weibo Suffers New Setback With Lawsuit 吉林市驻京办可能起诉新浪微博

Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和

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While it’s never too smart to call a major market turnaround, growing signs are emerging that last year’s confidence crisis for US-listed China stocks may have finally turned a corner, with a strong rebound on the horizon if the broader market remains healthy. The first 2 months of the year have seen several positive developments for Chinese stocks in New York, following a disastrous 2011 that most would rather forget as their shares were pummeled by a series of accounting scandals that undermined the entire sector. Sensing that the worst of the crisis is over, 3 Chinese companies have filed for new US listings in the last few weeks, betting that investors will once again be interested in the China growth story. At the same time, short sellers and lawyers who seized on the crisis to make quick bucks have found far less success in some of their most recent attacks, indicating investors are once again giving Chinese companies the benefit of the doubt now that many more questionable firms have been de-listed. The nascent return of confidence is most evident in the share prices for many US-listed Chinese firms, some of which fell by 50 percent or more last year at the height of the crisis that began with attacks on 2 names, financial services company Longtop Financial and timber firm Sino-Forest. Both companies saw their shares tumble after short sellers questioned different aspects of their accounting, and Longtop was ultimately de-listed. Since bottoming out in mid December, shares of many industry stalwarts that were dragged down in the crisis have posted a strong recovery, with Internet search leader Baidu (Nasdaq: BIDU) and top web portal Sina (Nasdaq: SINA) both up about 20 percent since mid-December. Even smaller names have joined in the rally, with social networking site Renren (NYSE: RENN) and online video site Youku (NYSE: YOKU) both up by 30 or more. Equally significant has been the failure of a number of short seller attacks, which netted big bucks for companies last year. Muddy Waters, whose name became synonymous with the attacks after its successful assault on Sino-Forest last year, has found much less success with a more recent attack on Focus Media (Nasdaq: FMCN). Focus shares initially fell sharply after Muddy Waters questioned some of its data late last year, but have rallied sharply since then and are now close to their pre-attack levels. A similar attack late last year on security software firm Qihoo 360 (NYSE: QIHU) has also failed to convince investors, with the company’s stock now trading near pre-attack levels after initially falling more than 10 percent. At the same time, a series of recent investor lawsuits designed to seize on a drop in the share price of IT outsourcing firm Camelot Information Systems (NYSE: CIS) has also failed to dent the company’s stock price, again indicating investors may feel the worst is past and these Chinese companies are now more trustworthy. As the confidence creeps back, a small trickle of Chinese companies have decided to test their luck with the New York IPO market. Car rental firm China Auto was first out of the gate when it filed for an offering in January, ending several months with no major new Chinese listings. It was followed this month by e-commerce firm Vipshop and Shanda Cloudary, which initially filed for an IPO last year but had to pull the offering due to poor investor sentiment at the height of the crisis. The real test of whether the worst is really past will lie in the weeks ahead, as these 3 offerings go to market and meet with either investor interest or more skepticism. I personally think China Auto could do well, though the 2 Internet offerings could meet with more tepid interest as both are still losing money. Still, if these 3 can post even modest success, which looks like a strong possibility, it could signal the crisis has truly turned the corner, meaning a solid rally may be in store for these stocks for the rest of the year.

Bottom line: Growing signs are emerging that the confidence crisis for US-listed China stocks may be over, with 3 upcoming IPOs providing a strong test of a turning point for the battered sector.

Related postings 相关文章:

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ Citron Keeps Up Qihoo Assault 香橼继续攻击奇虎

◙ Sharks Continue to Circle China Stocks 在美上市中国企业将持续面临做空和法律诉讼压力

China Puts the Brakes on Luxury Cars 中国公务车拟告别豪华车

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A new plan being floated by the central government could put the brakes on soaring sales growth for luxury brands like Audi (Frankfurt: VOWG) and BMW (Frankfurt: BMW), who have so far managed to defy a broader downturn for China’s auto sector. The shift would come as a huge blow for those names just as most are investing billions of dollars to increase their capacity to cater to China’s huge thirst for luxury brands, though I expect the final outcome will be a compromise that allows some government sales to continue. Let’s look at the facts first, which have the Ministry of Information and Industry Technology (MIIT) reportedly proposing a plan that would limit all government agencies to buying only domestic brands, in an attempt to support struggling homegrown players like Dongfeng (Shanghai: 600006) and Geely (HKEx: 175) that have steadily been losing market share to the more aggressive and resource-rich foreign names as growth sharply slows in China’s auto market. (English article) Such a step would mark a huge loss for foreign names like Audi, BMW and Mercedes, as the government now purchases about $13 billion worth of cars each year, many of those luxury models. China’s auto market zoomed in 2009 and 2010, posting growth in the healthy double digit range as Beijing offered a range of incentives to stimulate sales at the height of the global financial crisis. But now the government has ended most of those incentives, causing growth to drop to just 4 percent last year, with most foreign brands reporting low double-digit gains while many domestic ones saw their sales drop sharply. This latest government initiative seems aimed at throwing a lifeline to the domestic players. The only problem is, a big portion of those government fleet sales are for luxury brands that many higher officials prefer, and while the domestic players can provide reasonable mid-range cars, few can offer such higher-end models. One of my friends recently scoffed at the prospect of buying a Chinese-made smartphone, saying he would get laughed at by all his friends who own trendy iPhones. The same is true for many high government officials, who would probably rather walk to work than be seen getting out of a Geely or Chery automobile. At the end of the day, I suspect that cries of protest from both government officials and the foreign luxury brands themselves will get heard by central regulators at the MIIT, and both sides will reach a compromise that will allow continued purchasing of luxury cars by government agencies. But at the same time, I do expect we’ll see a slowdown for the luxury automakers as those government agencies come under pressure to buy more domestic brands, bringing growth rates for the foreign names more into line with mainstream foreign players like General Motors (NYSE: GM) and Volkswagen.

Bottom line: Foreign luxury car makers will avoid a proposed ban on sales to Chinese government agencies, but will see such sales drop sharply as the government tries to assist domestic brands.

Related postings 相关文章:

◙ Geely Leans on Struggling Volvo 吉利依靠处于困境中的沃尔沃

◙ Car Sales: Domestics Down, But Not Out 汽车销量：国产车下降，接近拐点

◙ China Car Sales Sputter Out of the Gate 中国汽车销售龙年遭考验

Group Buy Clean-Up Grows, E-Commerce Next 团购行业洗牌加剧，下一个是电子商务

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Growing signs are emerging that the much-needed clean-up of the overheated group buying space is well underway, with domestic media reporting a massive closure of websites in January alone, as the stalled IPO for industry leader LaShou remains nowhere to be seen. According to the domestic reports, some 117 group buying sites shut down in January, although the space still remains crowded with nearly 3,800 players still in operation. (Chinese article) Reflecting the cutthroat competition that still remains, other media reports are saying the government regulator has stepped in and limited the size of discounts on movie tickets, in the latest of a string of such moves that look designed to cool down the sector, despite cries of protest from group buying sites themselves. (English article) The latest wave of closures at mostly smaller sites follows a string of layoffs at much larger names like Gaopeng, the joint venture between global leader Groupon (Nasdq: GRPN) and Tencent (HKEx: 700), and Groupon.cn, which is unrelated to the US company. But perhaps the biggest sign of trouble has come from sector leader LaShou, which, like most other players in the space, was reportedly bleeding cash when it filed for a New York IPO last year, only to see the offering indefinitely delayed when regulators reportedly questioned some of the company’s accounting methods and asked for more information. (previous post) A couple of Chinese Internet companies have filed for New York IPOs already this year (previous post), but LaShou’s offering seems to have completely disappeared, with no news on what’s happening since the first reports of trouble first emerged in November. Rival 55tuan has also said it is going ahead with its own planned IPO, but I would be surprised to see that offering go forward until the second half of the year at earliest, if at all. Meantime, the big questions are: who will be the first big victim in the space to close shop; and who is next? In answer to the first question, the situations at Groupon.cn and Gaopeng both sound quite dire, based on the media reports, and I wouldn’t be surprised to see one of them become the first big victim of the cleanup. For the second question, the next big space in big need of a cleanup is clearly e-commerce, where competition has also grown rampant over the last year and most players are reportedly bleeding cash. Dangdang (NYSE: DANG), one top player, reported a large and widening quarterly loss last week (previous post), and news reports regularly appear about the latest company to lay off employees and close shop. Look for the e-commerce cleanup to accelerate in the year ahead, with more layoffs and the closure of one or more larger players likely as well.

Bottom line: The cleanup of the online group buying sector is picking up pace and should peak around mid-year, with e-commerce following close behind.

Related postings 相关文章:

◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合

◙ LaShou IPO Derails

◙ Group Buying Turmoil Grows With 55tuan Layoffs 窝窝团撤站裁员 团购业整合在即

Unicom Trials 4G, ZTE Dusts Off Old Numbers 中国联通试验4G技术 中兴通讯旧账重提

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A couple of items from the telecoms space have caught my attention this overcast Monday in Shanghai, one containing the first news I’ve seen on 4G plans of China Unicom (HKEx: 762; NYSE: CHU), China’s second biggest telco, and the other a silly announcement from telecoms equipment giant ZTE (HKEx: 763; Shenzhen: 000063) that seems designed to divert attention from its rapidly shrinking profits. Let’s look first at Unicom, which finally appears to be thinking about the future as it puts a year of management turmoil behind. A report in the English-language Shanghai Daily cites a Unicom official at a press conference with Shanghai’s mayor saying the company will spend $1.3 billion to upgrade its systems in the city over the next few years. (English article) The list of projects contains many familiar items, such as improving broadband speeds and adding wi-fi hotspots. But the one that caught my attention was that some of the money will go to trialing 4G technology, and that Shanghai has been chosen as one of the first batch of cities where trials will take place. In my view this announcement looks quite significant, because up until now only China Mobile (HKEx: 941; NYSE: CHL), the nation’s largest telco, has moved aggressively to develop 4G, with advanced large-scale trials already taking place in a half dozen major cities. For technological reasons, Unicom and smaller rival China Telecom (HKEx: 728; NYSE: CHA) should require far less time to develop their 4G networks, meaning that if Unicom really starts trialing technology this year it could easily commercialize its 4G network around the same time as China Mobile, perhaps as early as late 2013. If the company can get organized and focus on building its business, which it may finally be doing, it could easily find itself in a strong position when the regulator awards 4G licenses. Moving on quickly to ZTE, the company issued a press release that I can only call silly late last week boasting that it achieved the world’s fastest revenue growth of 33 percent in the first three quarters of last year, according to a new report by market research firm Frost and Sullivan. (company announcement) While obviously it’s nice to be cited as a leader in such a report, the truth is that the first 3 quarters of last year are now nearly half a year in the past, meaning that much may have changed since then. But more importantly, it says nothing about ZTE’s profit, which is shrinking as quickly as revenue is growing as the company pursues a risky strategy of rapidly building up its cellphone manufacturing business by selling low-cost models for little or no profit to quickly build market share. (previous post). I’m not saying that ZTE shouldn’t be proud of its rapid revenue growth, which is coming mostly from its cellphone expansion. But if it’s smart, it will keep a careful eye on its bottom line or risk watching its profit continue to erode and possibly even disappear, wiping out any positive effects of fast-growing revenue.

Bottom line: Unicom’s launch of 4G trials means it could quickly catch up to China Mobile, while ZTE needs to pay equal focus to both its top and bottom lines as it builds up its cellphone business.

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