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More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

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The latest sign of trouble is emerging from China’s banking sector, where Minsheng Bank (HKEx: 1988; Shanghai: 600016), one of the nation’s more commercially-focused lenders, has just announced plans to raise up to $1.6 billion or more to bolster its shaky capital base, even as Beijing is encouraging banks to lend even more. Minsheng’s plan would see it issue new H-shares in Hong Kong, and could also see a convertible bond offering linked to its Shanghai-listed A-shares, according to a filing with the Hong Kong stock exchange. (HKEx filing; English article) The new fund raising would follow similar recent moves by ICBC (HKEx: 1398; Shanghai: 601398), China Merchants Bank (HKEx: 3968; Shanghai: 60036) and Ping An Insurance (HKEx: 2318; Shanghai: 601318), and are likely to be followed by more such announcements this year as many of the loans made to local governments in 2009 to boost China’s economy during the financial crisis start to sour. This latest share issue from Minsheng is particularly worrisome, as the privately-funded bank is one of China’s few major players that doesn’t count the government as its major stakeholder, meaning it is more commercially focused and better reflects true market conditions. Look for more capital raising plans in the next few months, with analysts saying Agricultural Bank of China (HKEx: 1288; Shanghai: 601288) and Bank of Communications (HKEx: 3328; Shanghai: 601328) both looking likely to need new cash soon. The new round of cash calls is even more alarming than a similar round 2 years ago, as this time the banks, despite their shaky balance sheets, are also being called on by Beijing to boost their lending as economic growth shows signs of slowing sharply. Beijing is making its call even though it has also ordered banks to sharply cut back on their loans for mortgages and to local governments, which are 2 major sources for new lending. As a result, one of the few outlets for new loans has been the stock market, which has rallied 10 percent since the beginning of the year on a flood of new money into stocks. Reflecting the unbalanced situation in the stock market, newly listed Jishi Media (Shanghai: 601929) soared 87 percent in its trading debut in Shanghai on Thursday. (English article) Sure, perhaps Jishi is an interesting company as China finally starts to let its media companies go public. But at the end of the day, Jishi is still just a tiny national player and shouldn’t be getting this much attention. Look for the stock market rally to continue as long as banks keep boosting their lending, and then for problems to set in later this year when the rally fizzles and many of the new loans start to sour.

Bottom line: Minsheng Bank’s new capital raising plan is the latest for China’s troubled banking sector, with more to come this year as banks try to obey Beijing’s orders to boost their lending.

Related postings 相关文章:

◙ 2012: Capital Raising II Year For China Banks 2012：中国银行业的又一个融资年

◙ Banks to Lend More, But to Whom? 银行获准增加放贷 但流向选择有限

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

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

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Dangdang (NYSE: DANG), China’s only major listed e-commerce site, has just released its latest quarterly results that show its losses ballooning, reflecting the overheated competition in the space that is already starting to hit many smaller companies and could soon even claim a bigger player. Dangdang’s latest report shows its loss jumped to 130 million yuan, or nearly $21 million, in the final quarter of last year, reversing a $2 million profit the previous year. (company announcement) But perhaps more worrisome, the loss was nearly double the company’s loss for the previous quarter, as its margins tumbled amid a series of price wars with archrivals 360Buy, Amazon China (Nasdaq: AMZN) and Wal-Mart-backed (NYSE: WMT) Yihaodian, in an increasingly bloody war that has already started to claim a number of smaller victims. Earlier this week, another online retailer, money-losing Vipshop became China’s first Internet company to file for a New York IPO this year, amid a flurry of chatter that the company was in desperate need of cash that boded poorly for the offering, which I suspect may never happen. (previous post) Another high profile dispute has seen a company named Pinju Wang have to suspend operations after saying it failed to receive promised funds from entities connected to online entertainment specialist Shanda. (Chinese article) Also significantly, 360Buy, one of the biggest forces behind the current price wars, has denied several times this week it has plans to launch a New York IPO this year, even after it announced such plans late last year, only to almost immediately start running into delays. Such denials are always problematic, as Chinese companies will often deny something even when it’s true. But in this case, I suspect that 360Buy may be afraid to proceed with an offering right now for fear of having to release a set of very ugly financials that would show the markets just how badly it is bleeding cash — hardly a way to attract investors. The markets are already showing their displeasure at the rampant competition, bidding down Dangdang’s shares by as much as 10 percent after its results came out, though they bounced back a bit afterwards to close down just 4 percent. Still, Dangdang’s shares are trading at a quarter of their level from just a year ago, and I see further pressure until the current price wars finally start to subside — a turn unlikely to happen until late this year at the earliest.

Bottom line: Dangdang’s ballooning loss in its latest results reflect rampant competition in China’s e-commerce space, with little relief in sight until late this year at the earliest.

Related postings 相关文章:

◙ Vipshop Vies For First Internet Listing of 2012 唯品会欲在赴美上市电商公司中力拔头筹

◙ 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 Discovers E-Books — Finally 当当推电子书仍有成功希望

Noah Profits From China’s Wealthy 诺亚财富将与中国富人阶层金融服务市场一道成长

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After years of following the same tired old global banking names into and more recently out of China, it’s nice to suddenly see some refreshing new entries to this dynamic but also challenging financial services market. First there was an interesting tie-up last month that saw American Express (NYSE: AXP) investing in a Chinese mobile e-payments company called Lianlian (previous post), and now a US-listed wealth management specialist named Noah Holdings (NYSE: NOAH) says it has become one of the first companies in its category approved to distribute mutual funds to its Chinese clients under a new program by the China Securities Regulatory Commission, China’s securities regulator. Investors certainly liked the news, bidding up shares in Noah by 30 percent in Wednesday trade, as they welcomed the development as evidence that Noah is well positioned to become an important player in catering to China’s growing number of wealthy individuals, especially in its home base of Shanghai. Companies like Noah aren’t really in the same league as American Express, and with a market cap of just $450 million it is a tiny fraction of the size of big names like Citigroup (NYSE: C) and RBS (London: RBS), which once were quite bullish on China but more recently have been retreating from the market to focus on fixing their much bigger problems at home. But the growth of such smaller companies like Noah and Lianlian represents a potential interesting opportunity for investors, and  a trend for the future that could see smaller firms with foreign connections and expertise moving in to fill a vacuum left by the departure of the big foreign banks. These new smaller firms are already following in the footsteps of other niche oriented global players like eBay’s (Nasdaq: EBAY) Paypal, which are also finding good business opportunities as China opens developing markets like e-payments. I honestly don’t know enough about Noah to comment beyond the fact that this latest development looks like a good one for the company, which is well positioned to profit from the growth in China’s wealth management market. Look for more such companies to emerge in the next few years, taking advantage of a maturing financial services market where many customers will be looking for more niche-player specialists as alternatives to the big-name banks and brokerages.

Bottom line: Wealth management specialist Noah Holdings represents a new generation of niche-oriented financial services firms that should see rapid growth over the next few years.

Related postings 相关文章:

◙ AmEx Chases E-Payments With Lianlian Link 美国运通联手中国连连集团

◙ Banks to Lend More, But to Whom? 银行获准增加放贷 但流向选择有限

◙ Beijing’s Latest Mixed Signal Bodes Poorly for Banks 中央政府最新政策预示对银行不利

Facebook, NY Times Make New China Moves Facebook和纽约时报在华新动向

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There are some interesting new moves in China’s new and traditional media spaces, with Facebook, one of the industry’s youngest players, reportedly looking for young Chinese software programmers while the New York Times (NYSE: NYT), one of the oldest players, is taking a gamble on publishing in the market. Let’s take a look at Facebook first, as that’s the more interesting of the 2 developments as the company prepares for its highly anticipated multibillion-dollar New York IPO. Just last week I wrote that Facebook had registered a number of its trademarks in China (previous post), in the latest preparations for its long-stated plans of entering a market which it has said is critical to any global strategy. Now domestic media are citing a number of students at some of China’s leading science universities saying they have been approached about applying for software programming jobs with Facebook, which would include training stints in the US. (Chinese article) Certainly the implication here is that these bright young students would be sent to the US for cultivation as future leaders of Facebook’s China site, if and when it ever sets up such a site. China followers know that Facebook’s global web site has been blocked in China since 2009, and the company has reportedly run into problems for plans to open a China-specific site, with Beijing laying down several conditions that Facebook would find very unattractive. (previous post) Despite all the setbacks, these latest developments indicate Facebook is still pressing ahead aggressively with plans for an eventual China site, and won’t quit until it finally gets what it wants. Kudos to Facebook founder Mark Zuckerberg for his determination! On the less controversial front, the New York Times, arguably one of the world’s most respected media names, has officially entered the world of China publishing by partnering with a local company to produce a monthly science magazine for distribution in major Chinese cities. In fact, the New York Times is probably one of the last major global magazine publishers to discover China, as most other major global players are already active in the market through similar partnerships. What’s significant is that all of these global publishers now operate in a gray area, since foreigners technically aren’t allowed to publish in China in any form. So the entry of such a major name, and also a relatively conservative one, like the Times looks like affirmation that the market may finally be maturing and perhaps Beijing could even soon lift the publishing restriction on foreigners. It’s also significant that the Times chose to publish a science magazine, as clearly such a topic is far less controversial than other more sensitive social topics. Look for this move by the Times to be followed by other publishers who haven’t entered the market yet, as Beijing gradually releases its restrictions on foreigners in the sensitive industry.

Bottom line: Facebook’s new China hiring campaign highlights its determination to enter the market, while the New York Times’ entry to China publishing reflects a maturation of that market.

Related postings 相关文章:

◙ Facebook, DreamWorks in Latest China Moves Facebook、梦工厂在华最新动向

◙ Kaixin Looks to Cash in on Facebook Effect 开心网似乎在利用Facebook效应

◙ Despite China Rebuff, Facebook Going Back for More Facebook明知山有虎，偏向虎山行

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

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While most of China’s top automakers are relying on partnerships with major global brands to help get them through a domestic downturn expected to last for the next 1-2 years, Geely (HKEx: 175) is taking an interesting approach by turning to the struggling Volvo, with plans for a new joint venture. (English article) First off, I have to say that this is the first time I’ve heard of a company forming a joint venture with itself, since Volvo has been 100 percent owned by Geely since the Chinese automaker’s landmark purchase of the Swedish company 2 years ago. But perhaps more importantly, Volvo is a struggling, second-tier name that lacks the resources to be an effective partner for Geely, which itself is trying to bolster its China market position even as it struggles under a mountain of debt that it took on to buy the Swedish car maker. Let’s look quickly at this newly announced deal, which will see Geely and Volvo team up to develop a new brand for the China market, following a similar strategy by General Motors (NYSE: GM), which has launched a new brand, Baojun, with Chinese partner SAIC (600104), specifically for the China market. The big difference in this case is that Geely itself is already a well known Chinese brand, and I’m not sure why the company — whose resources are already quite stretched — is choosing to develop a new brand instead of focusing on reviving both its own Geely name as well as Volvo’s. Geely previously announced plans to set up 2 major new Volvo car manufacturing plants in China in a bid to boost its sales, and some of the reports are saying the establishment of this new joint venture may be partly designed to satisfy regulatory requirements in order to get the 2 new factories approved. Still, the plan to introduce a new brand, and also plans to develop green cars at the joint venture, seem like a total waste of resources for both Geely and Volvo, and will only lead to more operational and financial distractions just when the company should be focusing on its core Volvo and Geely brands. In fact, this latest plan is just the latest sign of a company in disarray following the Volvo purchase, which sadly is becoming normal for Chinese firms that buy struggling, major global assets at bargain prices, only to discover it’s much easier to buy such assets than to repair them. That said, this development of a new brand looks completely misguided, and is just the latest step of Geely’s downward spiral that could seriously damage the company.

Bottom line: Geely’s plans to form a joint venture with its Volvo arm is the latest sign of disarray for the former high-flyer, boding poorly for its future over the next 2-3 years.

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

◙ Cars: US, Germany Clobber Japan, Domestic Rivals 美德汽车在华完胜日本和中国车商

◙ Geely Choking on Volvo Debt, Weak Sales 吉利债台高筑

AsiaInfo Bidding War Erupts, More to Come 亚信联创收购战打响

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The confidence crisis for US-listed China stocks has taken an interesting twist with the start of a bidding war for AsiaInfo-Linkage (Nasdaq: ASIA), one of the oldest US-listed China firms. The development underscores the fact that despite questionable accounting practices at many smaller US-listed Chinese firms, there are still many good companies in the market that may look like good values for buyers wanting to take advantage of depressed share prices that have resulted in cheap valuations. On the IPO front, meanwhile, a steady stream of noise from e-commerce giant 360Buy, which also goes by the name Jingdong Mall, indicates the company may be getting close to making its first public filing for a public offering that it first announced plans for last fall. Let’s look at AsiaInfo  first, as the new bidding war could be the first in a new string of buyout offers for healthy US-listed Chinese firms whose shares have tumbled by 50 percent or more in the last year after a series of accounting scandals. Media are reporting that big-name US private equity firms including KKR and TPG are eying bids for AsiaInfo-Linkage that could value the company at $1 billion or more. (English article) That would be a big premium over its market value that stood at about $700 million when Chinese investor CITIC Capital made an offer to buy out AsiaInfo last month for an undisclosed sum. (previous post) AsiaInfo’s shares rose 11 percent to $12.95 after news of a potential bidding war came out yesterday, and its shares have risen considerably from December when they traded below $7. Of course it’s also worth noting the company’s shares traded above $30 less than 2 years ago, when Chinese tech and Internet stocks were still popular. Investors will be watching closely to see how this new bidding war evolves, and I would expect to see more offers emerging for other healthy companies that private equity firms see as undervalued at current market prices. Meantime, 360Buy has just said it will invest 3.5  billion yuan, or more than $500 million, to beef up its logistics systems, in the latest of a series of recent announcements to raise its profile in the run-up to a potential multibillion-dollar US IPO. (English article) The company earlier this week announced the official launch of its e-book service, and has recently brought in a series of experienced managers from other companies to make itself more attractive to overseas investors. I wouldn’t be surprised to see the 360Buy make its first public IPO filing by the end of March if stock markets remain strong, though it will probably attract limited investor interest due to stiff competition from not only domestic rivals like Dangdang (NYSE: DANG), but also aggressive foreign players in China like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT), which is trying to acquire a controlling stake in local player Yihaodian.

Bottom line: A bidding war for AsiaInfo-Linkage could presage more such wars for US-listed Chinese firms whose shares have been hit by negative investor sentiment.

Related postings 相关文章:

◙ AsiaInfo, Xinhua in Latest Listings Shuffle 新华电视悄然上市 亚信联创或被摘牌

◙  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

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

Powerless AES Looks to Bow From China 爱依斯出售中国发电业务 凸显行业严酷形势

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When it comes to operating in China’s heavily regulated energy sector, it helps to have friends in high places. China’s oil companies seem to have such friends, but companies that generate power and sell it to consumers and businesses seem to lack such strong connections. That reality has led many power generators to struggle in recent years, and is leading US power producer AES (NYSE: AES) to look for buyers for its China-based assets, according to a foreign media report. (English article) The development underscores the huge risks of operating in China’s energy markets, where companies can only sell their finished products such as gasoline and power at state-set prices even though they must buy raw materials like crude oil and coal on the open market, where big price swings are common and recent prices have soared due to turmoil in the Middle East and North Africa. According to a media report, AES has recently hired an investment bank to explore a sale of part or all of its China power-generating assets, in a deal that could fetch as much as $400 million. The move would mark a retreat for AES, which is one of the oldest independent foreign power producers in China and now owns around 15 plants in the country. AES and many of its domestic China rivals, which include names like Huaneng (HKEx: 902) and Datang International Power (HKEx: 991), have struggled to earn profits in recent years as China, interested in controlling inflation, has failed to raise its state-set electricity rates in line with soaring prices for coal and crude oil. The system has also hit sellers of refined oil products like Sinopec (HKEx: 386; Shanghai: 600028; NYSE: SNP) and PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR), though both of those companies seem to have better connections in Beijing, with the result that the government adjusts its state-set prices for their products more often. AES’ scaleback or withdrawal from the market highlights just how tough China  is for both domestic and foreign power producers, and means we’re unlikely to see much new foreign investment in this area in the near future and limited returns for any company that does invest. Any new investment will mostly be limited to government-controlled companies like Datang and Huaneng, which take their orders from the state, making shares in these publicly listed power generators poor investment choices for the near term.

Bottom line: AES’ plans to exit China underscore the difficulties of operating in the country’s power generation market, and bode poorly for rivals like Datang and Huaneng in the near term.

Related postings 相关文章:

◙ Pricey M&A, Cheaper Gas Undermine Sinopec 溢价收购和成品油降价 中石化面对双重利空

◙ Stumbling CNOOC Replaces Chief Executive 中海油换将李凡荣接棒CEO

◙ 2012: The Year of China Resource M&A? 2012：中国企业的资源并购年？

 

Alibaba.com Privatization: Parent IPO Coming? 阿里巴巴网私有化：母公司或将上市？

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The latest wrinkle of the Alibaba saga has just unfolded with the company’s announcement of a plan to take its B2B site Alibaba.com (HKEx: 1688) private at a big premium, in what looks like a step before a potential new multibillion-dollar IPO for the entire group. I’m usually not a big fan of this kind of IPO for a parent company with many different business units, as I think listings of separate units is a more transparent way for people to invest in such companies. But in this case, the fact that all of Alibaba’s different pieces are centered around its core e-commerce business may make such a parent-level IPO a smart move, as this could be a rare case where all the pieces collectively might get a better price than the sum of the individual parts. Let’s backtrack a moment and look at the privatization deal, which has the unlisted parent company, Alibaba Group, offering HK$13.5 per Alibaba.com share, a 46 percent premium over the company’s last closing price, valuing the listed company at about $8.7 billion. (HKEx announcement) That valuation would help Alibaba in its broader plans to buy back the 40 percent stake in the the parent company held by Yahoo (Nasdaq: YHOO), at a higher valuation, which some recent investors said could be as high as $32 billion. The privatization plan comes as Alibaba.com’s recent performance has suffered amid a fraud scandal that forced the resignation of its CEO last year. The listed company just released its latest quarterly results showing its fourth quarter profit fell 6 percent, and its number of premium suppliers also fell. (results announcement) The privatization will allow Alibaba to focus on its bigger objective of buying back the Yahoo stake, and also tells the market what it thinks the Alibaba.com business is worth, namely about $8.7 billion, helping it to get a better valuation for the entire company. But from my perspective, the final objective in all this increasingly looks like a potential IPO for the entire Alibaba Group within a year of completion of the Yahoo stake buy-back. Part of the buyback will almost certainly include bringing in investors to help pay some of the bill for the Yahoo stake, which could be worth up to $13 billion. Many of those new investors, as well as some of Alibaba’s older investors, will want to get some quick returns for their investments, which Alibaba could do most easily by listing the entire company. Such a listing would probably also attract much more interest from stock market investors who would be much more excited about buying into China’s leading e-commerce specialist rather than just one of its pieces. So after the privatization and buyback are finished, I wouldn’t be surprised to see Alibaba Group file for an IPO in Hong Kong or the US, possibly as soon as the end of this year.

Bottom line: Alibaba’s latest plan to buy privatize its B2B unit looks like a step towards what could ultimately a multibillion IPO for the entire company, possibly by year-end.

Related postings 相关文章:

◙ Alibaba Looks for Value With Delisting Plan 阿里巴巴计划退市以寻求价值

◙ Alibaba: Let’s Get This Show Finished 阿里巴巴和雅虎赶紧“离婚”吧

◙ Yahoo, Alibaba Dance Nears Finale　　雅虎应与阿里巴巴撇清干系

Huawei, ZTE In Latest PR Offensive With US Spending Spree 华为、中兴签订美国大单恐醉翁之意不在酒

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China’s telecoms manufacturing stars Huawei and ZTE (HKEx: 763; Shenzhen: 000063) are turning up their PR offensives in the US with announcements of major new purchasing deals, in what also looks like an intensifying rivalry that could ultimately result in a bruising war as each vies for new dominance in the low-cost smartphone space. It what looks almost like a case of deja vu, both companies have just announced new deals that look almost identical to purchase billions of dollars worth of chips from leading US design houses Qualcomm (Nasdaq: QCOM) and Broadcom (Nasdaq: BRCM). Perhaps not coincidentally, both deals come just days after a visit by Chinese Vice President Xi Jinping to Southern California, where both Qualcomm and Broadcom are based, and I suspect all 4 companies were working hard to finalize their deals to announce during that visit but probably couldn’t meet the deadline. Still both deals mark relatively major formal commitments to US purchasing by both Huawei and ZTE, which are both trying to prove that they can be strong partners in the lucrative but competitive US market, where suspicions run high that both companies, especially Huawei, are spying arms of Beijiing. Let’s look at ZTE’s deal first, which will see it invest $4 billion over the next 4 years to buy chips from Qualcomm, and another $1 billion to buy chips from Broadcom over the same period. (company announcement) In a separate announcement ZTE also said it will launch 2 new 4G smartphones at the world’s biggest telecoms show coming up next month in Spain, reflecting its recent big push into cellphones and indicating that a big portion of the purchasing for chips from Qualcomm and Broadcom over the next 4 years will be for use in cellphones. Meantime, Huawei has also announced it will buy $6 billion worth of chips over the next 3 years from 3 California companies, including Qualcomm, Broadcom and a third company called Avago Technologies. (English article) From a business perspective, both of these chip-buying deals look more like public relations exercises than anything else, though they also reflect the growing rivalry between Huawei and ZTE as each tries to develop its cellphone business, which tends to be less cyclical and less politically sensitive than their older networking equipment businesses. Both Huawei, ZTE, and nearly any telecoms equipment and handset maker for that matter, have both been clients for a long time already for Qualcomm and Broadcom, which are 2 of the world’s leading makers of both networking equipment and cellphone chips. My ZTE sources tell me that ZTE purchased more than $3.5 billion worth of chips and other telecoms components from US firms in the first 10 months of last year alone, although that list also included names like IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ) and Texas Instruments (NYSE: TXN) in addition to Qualcomm and Broadcom. I suspect this latest agreement probably doesn’t represent a huge increase in purchasing from Qualcomm and Broadcom, but is rather designed to highlight how both companies support the US economy and local jobs through their big purchasing. That’s important as both Huawei and ZTE work hard to penetrate the tough but potentially lucrative US market, with Huawei in particular embarking on aggressive PR campaign over the last year that included hiring more foreigners and making some goodwill investments in the US. At the same time, these big purchasing commitments also reflect both companies’ growing interest in cellphones, especially low-cost smartphones, with both recently stating their goals of becoming top 5 global players in the next few years. (previous post) These latest announcements indicate the rivalry on the low-cost smartphone front is heating up, which has already begun to take a toll on ZTE’s margins and bottom line and will likely erode profits at both companies in what could turn into a bruising battle over the next few years.

Bottom line: New mutlibillion-dollar purchasing announcements by Huawei and ZTE look largely like PR moves aimed at US politicians, but also reflect a growing cellphone rivalry between the pair.

Related postings 相关文章:

◙ Huawei Prepares for Change of Guard 任正非或准备告别华为

◙ Huawei and ZTE: Swapping Networking for Cellphones? 华为和中兴：转型进军手机市场？

◙ Huawei Discovers Cellphones 华为手机要向世界前三进军

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

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There’s a sudden mini-flood of news coming out of the telco space, with new signs that laggards China Mobile (HKEx: 941; NYSE: CHL) and China Unicom (HKEx: 768; NYSE: CHU) are becoming a bit more aggressive in the important 3G and 4G spaces. But as if to counter those signs, China Telecom (HKEx: 728; NYSE: CHA), the smallest of the country’s 3 telcos which also emerged as its most aggressive player last year, has just announced a long-awaited deal with Apple (Nasdaq: AAPL) that will see it start offering popular iPhones on the company’s 3G network early next month. Let’s start with the latest monthly 3G subscriber numbers, which show that Unicom is finally getting serious about that important part of its business, after losing share last year despite its strong technological advantages. The latest figures show Unicom had just over 32 million subscribers at the end of January, boosting its share of the market to 32 percent from 31 percent just a couple of months earlier. (company announcement) That gain is important, as it reverses a trend that saw Unicom’s share either stagnating or actually dropping lasts year as it suffered from management turmoil and shortages of handsets for its 3G network. It seems to have solved the handset problem for now, meaning we could see more market share gains in 2012, though lingering management issues could continue to hamper the company. Meantime, local media are reporting the telecoms regulator has official declared the commencement of second stage trials for TD-LTE, the 4G standard being developed by China Mobile. (English article) This announcement looks important since it affirms the regulator, after some initial hesitation early last year, is now fully supporting China Mobile’s plans to roll out a commercial 4G network as soon as next year, even though China Mobile itself has recently run into delays in its own trials for the technology. (previous post) Perhaps sensing that its 2 rivals were stealing some of its momentum, China Telecom has just come out with its own announcement, which has been rumored for months, that it will start to take orders for the popular iPhone 4S for use on its network starting on March 2, and start offering service for the handsets a week later. (company announcement) While highly anticipated, this deal is still big news for both China Telecom and the China market overall, as it formally ends a monopoly on iPhone sales in China held by Unicom since the launch of the popular Apple smartphones several years ago. China Telecom looks set to aggressively market the iPhone for its 3G network, which will hit profits in the short-term but could help it regain some of the momentum in the space it has recently lost to both Unicom and, to a lesser extent, to China Mobile.

Bottom line: China Unicom’s aggressive 3G push is yielding results with new share gains, but China Telecom could soon fight back with its newly announced iPhone deal.

Related postings 相关文章:

◙ China Mobile Bets on Call Centers, Sees 4G Delay 中移动4G网络建设延期 押注新建呼叫中心

◙ Unicom, China Telecom in iPhone 4S 中国电信有望领先推出iPhone 4S Race

◙ TD-LTE Hits First Delay, More to Come? TD-LTE技术首次延期 未来还会更多？

Ctrip Results: Investing for the Future 携程未雨绸缪提高未来竞争力

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Ctrip (Nasdaq: CTRP) has just released an earnings report that has left investors unsure of what to think of this travel bellwether, though I’m guardedly encouraged by signs that show it is preparing for a future of growing competition. Its latest results show that revenue grew 18 percent in the fourth quarter and is expected to maintain that rate in the current period, but that operating and net profit both fell by similar amounts — not exactly encouraging signs for an industry leader. (company announcement; Chinese article) The culprit behind the so-so results seems to be ballooning  expenses, which rose 46 percent in the fourth quarter due to a number of initiatives, including expansion of the company’s headquarters in Shanghai and procurement of new land in the interior city of Chengdu for expansion there as well. Ctrip also purchased the remaining 10 percent of Wing On Travel it didn’t already own, making it the full owner of the popular Hong Kong travel agency. Investors were a bit unsure what to think of the results, initially bidding up Ctrip shares slightly after the results came out, only to change their mind and ultimately bid the shares down by 1 percent. Clearly no one likes to see revenue growth stalling and profits falling, but I’ve always considered this company a strong innovator and leader in its core travel services space, and its latest jump in costs look to me like it’s making solid moves to build for the future. That could be important, as chief rival eLong (Nasdaq: LONG) saw its longtime stakeholder Expedia (Nasdaq: EXPE) become its controlling stakeholder late last year, indicating the leading US online travel services firm may be preparing an aggressive push into the China market. (previous post) What’s more, another up-and-coming player named Qunar got a major boost last year when it received a $300 million investment from leading online search firm Baidu (Nasdaq: BIDU). (previous post) Ctrip has always been a strong innovator, and its Shanghai and Chengdu expansions reflect its growing needs for workers and space as it adds interesting new products and services to its lineup. I also like the Wing On initiative, as that could position Ctrip for growth in the lucrative Hong Kong market and also provide a springboard into other foreign markets. On the whole, these latest results look relatively encouraging, though Ctrip will need to show that its increased spending can ultimately lead to stronger revenue gains and a return to bottom line growth.

Bottom line: Ctrip’s latest results show a company that is investing heavily for a future of stiffer competition, but it will soon need to show some returns on those new investments.

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◙ China Lodging: Rebound Ahead 中国经济型酒店业绩回升在望

◙ Ctrip’s Latest Initiative: Insurance 携程新举动：保险