Regulator Exposes China Mobile’s 3G Exaggeration 官员披露中国移动虚夸3G用户数量

By on

I’ve always suspected that China Mobile (HKEx: 941; NYSE: CHL), the country’s dominant mobile carrier, vastly exaggerates the size of its 3G business, and now it seems like the more authoritative national telecoms regulator agrees with me. The news shouldn’t come as a shock to anyone, but it does provide a clearer picture of how the 3G market is developing in China, an important indicator since high-speed data services that can be delivered over 3G and upcoming 4G networks is clearly the wave of the future. Let’s look at the latest news, which has an official from the Ministry of Industry and Information Technology saying the number of true 3G subscribers in China is probably around 80 million, or about half the combined total reported by China Mobile, along with its 2 main rivals, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). (English article) The official puts the blame for the inflated total figure squarely on China Mobile, saying the nation’s top mobile carrier exaggerates its numbers by including many voice-only users among the subscribers for its 3G network. By comparison, Unicom’s and China Telecom’s 3G subscribers use their service for data-related products such as Internet surfing. China Mobile’s latest figures show the company had 62 million 3G subscribers. So if most of the inflation is coming from China Mobile, it’s probably fair to assume that as many as 50 million or more of the company’s 3G users are simply using the service for voice calling, reducing China Mobile’s total figure to a mere 10 million or so. Even that figure could be high, as I have yet to meet a single person who uses China Mobile’s 3G service for Web surfing, with nearly everyone preferring Unicom and China Telecom. Industry followers know the reason for China Mobile’s anemic 3G performance is largely due to the fact that the government forced it to build a network based on a homegrown technology called TD-SCDMA, which has been plagued with reliability problems and lack of handsets. China Mobile has shown signs of planning to boost its 3G efforts following the recent retirement of long-serving Chairman Wang Jianzhou, announcing a steady stream of new handsets and chips for TD-SCDMA phones. But it’s still unclear how serious the company will be on that front, with its new leaders sending out some troubling signals back in April that China Mobile will continue to focus its efforts on next-generation 4G services, which aren’t expected to receive an official license from the MIIT for at least another couple of years. (previous post) Perhaps this latest indirect criticism by the telecoms regulator will embarrass China Mobile into promoting its 3G service more aggressively, which it really needs to do to remain competitive with Unicom and China Telecom. Otherwise, it could not only become a bit player in the 3G space, but could also see its overall market position quickly slip as more and more mobile users migrate to data service plans.

Bottom line: The industry regulator’s disclosure that China Mobile vastly overstates its 3G subscribers reflects the company’s weak promotion of the service and bodes poorly for its future position.

Related postings 相关文章:

◙ China Telecoms Regulator Plays 3G Target Games 工信部制定3G目标

◙ New China Mobile Chief Sends Bad Signals 中国移动新任领导传递糟糕迹象

◙ China Mobile Starts New Era as Wang Leaves 王建宙退休，中国移动开启新时代

China Lodging Adds Brand With Starway 汉庭旗下新增星程品牌

By on

An interesting trend is happening in China’s fledgling hotel space, where operators are diversifying their offerings by acquiring new brands in a bid to keep growing and appeal to a wider range of customers. China Lodging Group (Nasdaq: HTHT) has become the latest operator to make a move in that direction, announcing it has increased its stake in the Starway hotel chain to become the brand’s majority shareholder. (company announcement) At the same time, China Lodging Group, most known for its Hanting brand, announced plans to directly manage some new hotels under the Starway name, broadening its currently franchising model. The announcement doesn’t say much more, but it looks like China Lodging has big plans for expanding the Starway brand, which now has about 100 hotels and is known as a relatively reputable mid-range chain. The addition of Starway means China Lodging now has 4 major brands, Hanting, Season, Hi Inn and now Starway. Its growing stable of brands mirrors moves by the industry’s other 2 major US-listed players, Home Inns (Nasdaq: HMIN), which last year purchased the Motel 168 chain for $500 million; and 7 Days (NYSE: SVN), which purchased the smaller Huating chain for a more modest $21 million (previous post) Even industry veteran Jin Jiang (HKEx: 2006) is getting in on the act, pairing with a US company to form a joint venture that will manage hotels under other companies’ brand names. (previous post) In many ways, this kind of consolidation looks a lot like what happened in the US in the 1980s and 1990s, when the industry consolidated around 3 or 4 main players, including Marriott (NYSE: MAR) and Starwood (NYSE: HOT), which each now own a wide range of brands catering to everyone from budget travels to people who like to stay at posh and trendy hotels. This kind of consolidation is smart because it allows a single company to offer many products to different market segments, and allows them to aggressively expand the more popular brands to maintain their growth. It will be interesting to see how the situation plays out in the next few years, as the Chinese players are clearly focused on the budget and middle segments of the market, while the high end is still dominated by the big foreign brands. I wouldn’t be surprised to see at least one of the big Chinese brands acquired by a big international operator, which could use such an purchase not only to expand its presence at the low end of the China market, but could also potentially use it as a platform for expansion into other developing markets. Meantime, it’s also possible we could see a tie-up between one of the Chinese names and a regional higher-end regional brand like Shangri La (HKEx: 69) or Mandrarin Oriental. If that happens, I could easily see the world’s next major hotel operator emerging in China in the next decade, providing some interesting competition for the major Western names.

Bottom line: China Lodging Group’s addition of the Starway brand marks the latest consolidation move in China’s hotel business, which could eventually produce the world’s next major operator.

Related postings 相关文章:

◙ Hotels: Room for Consolidation 经济型酒店行业或加速整合

◙ Hotel Consolidation Moves Ahead With 7 Days Deal 七天连锁酒店收购表明酒店业整合继续

◙ Jin Jiang Looks for Room at the Global Lodge 锦江集团寻求跻身国际高端酒店之列

 

Renren Weighs Game Unit Spin-Off 人人网考虑分拆游戏业务

By on

Renren (NYSE: RENN) investors tired of seeing losses quarter after quarter could soon have another alternative as China’s leading social networking site reportedly plans to spin off its online game unit into a separately listed company. If true, the news would mark the latest plan by an Internet company to spin off an individual business into a separate unit, as part of a broader trend by this sector to provide investors with clearer choices focused on specific businesses like games or e-commerce. Many of China’s Internet companies, especially the older ones, often have lots of different businesses, from portals, to games, e-commerce and social networking, under a single company. One or more of the businesses are often profitable and end up subsidizing the others that are losing money — frustrating investors who might like the profitable units but care less for the loss-making ones. In this latest case, media are citing unnamed sources saying Renren is crafting a plan to spin off its game unit by September, and would eventually list the business separately with an IPO. (Chinese article) Renren may have hinted at this move when it released its first-quarter results last month, at which time it said its online game revenue nearly doubled to $17.5 million, accounting for more than half of the company’s total revenue. (previous post) I’m normally not a big fan of online game stocks, as business for such companies can vary widely due to their dependence on 1 or 2 popular titles for success. But in Renren’s case, the company actually looks a bit more interesting than traditional rivals like Shanda Games (Nasdaq: GAME) and The9 (Nasdaq: NCTY), which are simply game companies and little more. Renren brings the added advantage of millions of users for its core social networking site, which provide an instant audience for its games. For that reason, it could probably find more success with so-called casual gamers, the people who like to play games occasionally but aren’t as fanatical as hard-core players who can spend hours playing at Internet cafes. Renren hasn’t commented in too much detail on the game business, but presumably its profitable or would become profitable by the time of a public listing, most likely late this year or in early 2013. That would be an attractive alternative for investors, who have shunned Chinese IPOs for nearly a year now partly because most of the ones to list during that time were losing money. An IPO for Renren’s game unit would parallel a similar move by Internet portal Sohu (NYSE: SOHU), which spun off its gaming business into a separately listed company, Changyou (Nasdaq: CYOU) several years ago. Others reportedly weighing similar moves include gaming company NetEase (Nasdaq: NTES), which may spin off its portal business; and Internet giant Tencent (HKEx: 700), which recently reorganized and has discussed spinning off its e-commerce business. Look for more such spin-off plans in the next 12 months, potentially providing stock buyers with some more focused, and perhaps even profitable, China Internet investment options.

Bottom line: Renren’s reported plan to spin off its online games business is part of a trend that could see a flurry of similar moves and IPOs by profitable Chinese Internet companies in the next year.

Related postings 相关文章:

◙ Renren: China’s Next Gaming Company? 人人网：中国下一个网游企业？

◙ Tencent E-Commerce: Another Money Loser IPO 腾讯电商：将又一个失败的

◙ NetEase Name Change: Spin-Off Coming 网易更名：预示业务分拆

News Digest: June 2-4, 2012 报摘： 2012年6月2-4日

By on

The following press releases and media reports about Chinese companies were carried on June 2-4. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ MIIT Official: China’s 3G User Base Just 80 Mln (English article)

◙ China Lodging Group (Nasdaq: HTHT) Announces Investment in Starway Hotels (PRNewswire)

◙ Renren (NYSE: RENN) Considers Spin-Off, Listing for Game Unit – Source (Chinese article)

◙ Google (Nasdaq: GOOG) Warns China Users on Searches That May Break Connection (English article)

◙ Tencent (HKEx: 700) Soso, Microsoft (Nasdaq: MSFT) Bing to Tie Up on Search Ads – Source (Chinese article)

China Mobile Chases Fixed-Line Broadband 中国移动有望获固网牌照

By on

A steady stream of news has been coming from a broadband conference taking place in Beijing this week, including reports that the fixed-line broadband market could soon get a healthy dose of new competition with the entry of wireless giant China Mobile (HKEx: 941; NYSE: CHL) into the mix. (Chinese article) I’ll admit that I was never really clear why China Mobile had never previously entered the lucrative market for fixed-line broadband services, which is now dominated by its 2 main rivals China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE CHU), who offer services over their legacy networks inherited from the break up of China’s former fixed-line phone monopoly. After reading the reports, I’ve learned that China Mobile was never formally licensed to directly offer fixed-line broadband and instead was only allowed to offer such service through its China Railcom unit, the former telecoms unit of China’s national rail operator that China Mobile took over as part of an industry restructuring 3 years ago. Apparently that restriction was preventing China Mobile from getting many customers for its fixed-line broadband service, according to the reports. It looks like that could soon change and China Mobile could finally get the license it’s seeking to offer fixed-line broadband services directly. The biggest new factor in the equation is the ongoing anti-monopoly investigation launched last year by the powerful National Development and Reform Commission (NDRC) into China Telecom and Unicom over their fixed-line broadband service. (previous post) China Telecom and Unicom have taken steps to improve their broadband services since then, but the NDRC would certainly be pleased to see another major new player like China Mobile come into the space. What’s more, China is in the process of consolidating its many regional cable TV networks into a single operator, which could offer an instant wired-line platform for China Mobile to offer its service over. We saw signs last year that China Mobile was looking for just such a tie-up with the new cable TV operator, and broadband Internet service could be one of the easiest and most logical products for it to launch in such a tie-up. (previous post) Lastly, China Mobile has new top leadership following the recent retirement of its long-serving chairman, and those leaders are showing early signs of taking more aggressive steps to jump-start the company’s flagging growth with just this kind of initiative. If things keep moving in this direction, which looks likely, I predict we could see China Mobile announce a tie-up with the new national cable TV operator as soon as year-end, and for it to also announce a new fixed-line broadband license around the same time.

Bottom line: China Mobile could tie-up with the country’s new national cable TV operator as soon as year-end, and launch a new fixed-line broadband service soon after that.

Related postings 相关文章:

◙ China Mobile Eyes New Nat’l Cable Network 中国移动有望携手中国广播电视网络公司

◙ China Mobile Starts New Era as Wang Leaves 王建宙退休，中国移动开启新时代

◙ Anti-Monopoly Regulator Makes Poor Choice in Chasing China Telecom 中国反垄断初试牛刀 选错对象

Jingdong Mall: Back on the IPO Track? 京东商城上市：“狼”真要来了？

By on

After at least a month or 2 of silence from Jingdong Mall about its schizophrenic plans for a mega-IPO, the e-commerce giant that also goes by the name of 360Buy has suddenly vaulted back into the headlines with talk that it’s preparing a listing as soon as September. I honestly don’t know what to think of these latest reports anymore, as the company has sent so many contradictory signs on the IPO issue over the last year, with CEO Liu Qiangdong publicly denying plans for any such offering for at least a couple of years, even as unnamed people from the investment community say differently. I would have possibly have ignored these latest reports, except that they contain a level of detail that looks too deep to be purely gossip and speculation. (English article; Chinese article) According to one of the reports, Jingdong managers, including Liu Qiangdong himself, and their investment bankers met with analysts in Hong Kong earlier this week for 3 hours to discuss their plans, which include registration for a New York listing as early as June, followed by an actual IPO as soon as 3 months after that. Most of this news appears to be coming from analysts who attended the meeting, including one who said that Jingdong’s CFO was also present, as were representatives from major investment banks including Goldman Sachs (NYSE: GS), JPMorgan (NYSE: JPM) and CICC. During the meeting, Jingdong also reportedly made some of its first official disclosures about its sales, which apparently reached 21 billion yuan last year and are expected to more than double in 2012. There’s no mention of profits or losses, although most believe that Jingdong is losing big money due to a recent series of price wars with rivals like Alibaba’s TMall and Dangdang (NYSE: DANG). The report also discusses valuation, with 360Buy reportedly looking for a valuation of around $10 billion even though the investment banks said $6 billion is more realistic. This level of details leads me to believe that perhaps something is really happening, which would be consistent with some previous signals, and that we could actually see an IPO if the financial markets show even just a little improvement by this fall. If that happens, I would congratulate Jingdong for finally making up its mind after a past year of schizophrenic signals. As to whether anyone will want to buy into this offering, that’s a completely different story. I imagine that some investors will be tempted by the company’s position as China’s second largest e-commerce firm and big growth forecasts, but will no doubt be concerned about its losses. All that said, the offering could at least attract moderate interest, perhaps helping to breathe some life back into a moribund market for overseas Chinese listings.

Bottom line: The latest reports of an IPO as soon as September for e-commerce firm Jingdong Mall look like they may be credible, and could attract moderate investor interest.

Related postings 相关文章:

◙ Message to 360Buy: Make Up Your Mind! 京东商城IPO“暗战”

◙ E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

HNA Goes to Hollywood 海航走向好莱坞

By on

The huge potential of China’s box office is back in the spotlight again today, with word that US technology company RealD (NYSE: RLD) will install its 3D technology on a major new theater chain with up to 500 screens being set up by a unit of HNA Group, one of China’s more entrepreneurial business groups. (company announcement) The announcement by HNA Vigor Film Investment comes less than 2 weeks after China’s largest movie theater operator, Wanda Group, announced it will buy AMC Entertainment, the second largest US movie theater operator, in a landmark plan that also includes major facility upgrades. (previous post) All this shows how much potential these companies see in China’s movie market, now the world’s second largest, and also underscores their determination to take advantage of a newly relaxed quota for the import of foreign films that now command the big majority of the country’s fast growing box office. Let’s take a look at this latest news, which has HNA Group getting into the movie theater business with a big move that will make it one of China’s top movie theater operators, behind Wanda’s 730 screens in 86 movie theaters. Equally important, the installation of 3D technology in its new theaters means that HNA will be eligible to show films under China’s newly expanded quota for imported foreign movies. After limiting the annual import of foreign films to 20 for many years, China recently raised the figure by allowing in additional 14 movies in high-tech formats like 3D. That could mean a 40 percent increase in box office sales, as foreign films currently dominate a sector that generated more than $2 billion last year and whose sales could top $5 billion by 2015 as more affluent Chinese are willing to pay relatively expensive ticket prices to see big-budget films. The domestic film-making business has also gotten a lift in recent months, with global animation leaders Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) both setting up joint venture animation studios in China earlier this year. (previous post) Look for this trend to continue, with movie theaters quickly multiplying in China’s biggest cities to meet the growing demand from affluent Chinese eager to see a growing number of top-notch films coming into the country. That should play well not only for the theater operators and movie makers, but also technology and equipment makers like RealD and Imax (NYSE: IMAX).

Bottom line: Real ID’s tie-up to install 3D technology in HNA Group’s new theater chain marks the latest step the recent boom for China’s movie industry.

Related postings 相关文章:

◙ Wanda’s AMC Buy: The Show Isn’t Over Yet 万达并购美国AMC影院：表演还未结束

◙ News Corp Makes New Play for China 新闻集团入股博纳影业集团

◙ Disney, Tencent Tie-Up to Animate China 迪斯尼、腾讯合作研发动漫

 

News Digest: June 1, 2012 报摘： 2012年6月1日

By on

The following press releases and media reports about Chinese companies were carried on June 1. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ China Mobile (HKEx: 941) Submits Application to Run Fixed-Line Network – Source (Chinese article)

◙ 360Buy to IPO in September 2012 – Analyst (English article)

◙ Baidu (Nasdaq: BIDU) Unlikely to Invest in E-Commerce – Executive (English article)

◙ RealD (NYSE: RLD), HNA Group Unit to Install RealD 3D on 500 China Cinema Screens (Businesswire)

◙ PetroChina (HKEx: 857) Needs Time on Shale Gas, Looks Abroad: Energy (English article)

Commerce Ministry Weighs in on Price Wars 商务部或对电商领域价格战有所行动

By on

You know things are bad when even your national regulator isn’t optimistic, which appears to be the situation based on comments by a top Commerce Ministry official discussing rampant competition plaguing China’s e-commerce sector. Of course, it doesn’t take a genius to know that China’s vibrant e-commerce industry is in the midst of a series of cutthroat price wars, with new promotions being announced almost daily by the likes of Jingdong Mall, also known as 360Buy, Dangdang (NYSE: DANG), Yihaodian and Suning (Shenzhen: 002024). What’s more interesting here is the fact that the regulator is commenting on the situation, which hints that perhaps it may soon make an attempt to ease the situation — a step that would be consistent with China’s past behavior but also one I would strongly advise against. According to media reports, a top Commerce Ministry official for e-commerce, speaking at an event in Beijing this week, noted that the online retailing space has huge growth potential, with total sales set to pass 3 trillion yuan in the country’s current 5 year plan. But he also noted that companies are using the future to subsidize the present, which has led most major players to sink deeply into the red. (Chinese article) That trend has been all too obvious on company financial statements lately, with Dangdang, the biggest publicly traded player, and newly listed discount retailer Vipshop (NYSE: VIPS) both recently reporting big quarterly losses. (previous post) None of this is really news, as these price wars have been going on for nearly a year now. But what’s potentially cause for concern is that the Commerce Ministry is speaking so publicly about its own concern for the sector, since regulators are traditionally supposed to remain low-key and impartial to market developments as long as conditions remain orderly. These comments indicate the ministry may be considering taking steps to cool the competition, perhaps by bringing the major parties together to try and tone down their price wars. Indeed, the very same Commerce Ministry made a similar move last year, when it tried to mediate a patent dispute between telecoms equipment leaders Huawei and ZTE (HKEx: 763; Shenzhen: 000063). (previous post) That attempt looked clumsy and inappropriate and I doubt it yielded any results, and a similar attempt to end the rampant competition in e-commerce would most likely product a similar outcome. It’s somewhat understandable that Beijing regulators might want to prevent this kind of destructive situation from getting out of control, which is clearly the case with e-commerce. But experience in the West has shown that government intervention in these situations usually just makes the situation worse, and instead natural market forces are the best antidotes for these kinds of problems.

Bottom line: The Commerce Ministry needs to remain impartial in ongoing e-commerce price wars and let market forces resolve the situation.

Related postings 相关文章:

◙ Beijing Plays ‘Father Knows Best’ In Huawei-ZTE Spat 中国政府插手华为与中兴之争

◙ Dangdang and Gome: Marriage Ahead? 当当和国美：联姻前夕？

◙ Youku and Dangdang: Stuck in the Red 优酷和当当：生存在亏损

New Formula Needed for Focus Industries 中国需要找到支持重点产业发展的新路

By on

I’ll start off this Thursday with a word of advice to Beijing, which has just approved a plan to support 7 key growth industries: Find a new formula to implement your policies. The blueprint just passed by China’s cabinet is rather straightforward, containing the names of many industries that are already the recipients of strong state support, including alternate energy, new energy vehicles, environmental protection and new IT services like cloud computing. (English article) Perhaps not coincidentally, China approved the plan the same day the US announced preliminary anti-dumping tariffs for Chinese-made wind towers, one of the main components of producing wind energy (English article), and the same week that foreign media reported the European Union may soon launch a formal probe into unfair state support for Chinese telecoms equipment giants Huawei and ZTE (HKEx: 763 Shenzhen: 000063). (English article) Economic slowdowns like the ones being felt in the US and Europe are famous for producing this kind of protectionism, as governments seek to assist their own struggling domestic industries to boost their local economies during a downturn. But perhaps China should stop accusing the West of protectionism so much and consider that perhaps some of the growing number of similar allegations of unfair state support against it may actually have some truth to them. Just yesterday I wrote about reports that Beijing will give strong support in the form of new subsidies for its electric car and bus programs, which could easily result in similar accusations if companies like BYD (HKEx: 1211; Shenzhen: 002594) ever manage to actually export their products. (previous post) The country is also providing aggressive subsidies in the emerging cloud computing services sector that, again, are likely to produce similar accusations if China ever tries to export any of those products or services. It’s perfectly understandable that Beijing wants to promote many cutting-edge industries, and indeed many other countries have similar goals. What China needs to change, however, is its older habit of giving those industries free money, a policy that’s a relic of an earlier era when everything was state-owned. Such policies have become quite outdated in the current move to a market economy, and China needs to find its own new blueprint that doesn’t rely on direct handouts to help develop these sectors.

Bottom line: China’s latest plan to support 7 key industries shows Beijing still relies on state subsidies to support emerging sectors, a policy it needs to end to avert unfair trade claims.

Related postings 相关文章:

◙ BYD Set For Charge From New Incentives 中国刺激新举措或有助比亚迪

◙ Solar Storm Heats Up in US, China 中美太阳能产品征税之争升温

◙ ICBC, Huawei: It’s Cold Out There 工商银行、华为：国外市场冷清

News Digest: May 31, 2012 报摘： 2012年5月31日

By on

The following press releases and media reports about Chinese companies were carried on May 31. To view a full article or story, click on the link next to the headline.

══════════════════════════════════════════════════════

◙ Huawei, ZTE (HKEx: 763) Say Have Yet to Be Notified of Europe Anti-Dumping Probe (Chinese article)

◙ Commerce Ministry Urges B2C Sites to End Price Wars, Not Optimistic (Chinese article)

◙ US Sets Preliminary Duties on China Wind Towers (English article)

◙ Yingli Green Energy (NYSE: YGE) Reports Q1 Results (English article)

◙ Youku (NYSE: YOKU) Slowly Taking Over Tudou (Nasdaq: TUDO) Management (Chinese article)