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China Mobile (HKEx: 941; NYSE: CHL), keen to launch its 4G service sooner rather than later, is embarking on a major wi-fi initiative in the southern boomtown of Shenzhen, in what looks like an attempt to circumvent the telecoms regulator. According to a domestic media report, China’s dominant wireless carrier has signed an agreement with Shenzhen that will see it spend 6 billion yuan, or nearly $1 billion, over the next 3 years to create a wi-fi network blanketing the city using its 2G, 3G and 4G networks. To me this looks like a clever way for China Mobile to quietly commercialize its 4G service, based on a homegrown technology called TD-LTE, which is currently in the second stage of trials in 6 Chinese cities, including Shenzhen. China’s telecoms regulator only awarded 3G licenses 2 years ago, and it is unlikely to award 4G licenses for at least another couple of years as it gives the nation’s 3 telcos time to recoup their 3G investments, which have totaled around $50 billion to date. As part of the 3G licensing process, China Mobile was required to build a network based on a homegrown technology, called TD-SCDMA, which has suffered from numerous problems and tepid support from handset and networking equipment makers. Accordingly, it has moved aggressively ahead with trials based on the more promising TD-LTE 4G technology, even as it rapidly loses share in the 3G space to rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). This “wireless city” initiative in Shenzhen could be followed by similar initiatives in the other 5 TD-LTE trial cities, including Shanghai and Guangzhou, effectively allowing China Mobile to sign up millions of 4G data users even as its service remains in the trial stages. The 2 main risks to this strategy are: 1) that TD-LTE has lots of problems, which looks likely, causing consumers to shun the service; and 2) that the regulator realizes what China Mobile is trying to do and orders it to halt its wireless city plans. Either way, I have to applaud China Mobile for its creative approach, even though I suspect this initiative will ultimately run into lots of problems.

Bottom line: China Mobile’s “wireless city” wi-fi initiative in Shenzhen looks like a creative effort to bypass regulators in commercializing its 4G network, but is likely to fall flat.

Related postings 相关文章:

◙ China Telecoms Faces Power Struggle, Half-Baked 4G 中国电信行业遭遇政府监管权利斗争

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

◙ China Mobile Shuffle: Sea Change Coming? 中移动高层变动或引发重大变化？

Storm clouds are brewing on two separate fronts for China’s telecoms sector, with a power struggle shaping up between 2 major government agencies over an anti-monopoly investigation, while leading wireless carrier China Mobile (HKEx: 941; NYSE: CHL) rushes hastily ahead with new trials for its homegrown 4G technology. First the looming power struggle, which will pit China’s powerful state planner, the National Development and Reform Commission (NDRC), against the telecoms regulator, the MIIT, over an investigation into monopolistic practices in China’s broadband market by the nation’s second and third largest carriers, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). Chinese media are reporting the telecoms regulator, the Ministry of Industry and Information Technology (MIIT) is preparing its own investigation into monopolistic practices in the broadband space by China Telecom and Unicom, following the NDRC’s high profile announcement last week that it was conducting its own probe. (Chinese article) This kind of turf war is quite common in China, although one seldom sees it at such a high level as this involving such major state-run companies. Look for major friction as the NDRC aggressively pursues its anti-monopoly case, while the  MIIT, many of whose former officials now work at China Telecom and Unicom, is likely to defend current industry practices. Meantime on a second unrelated front, China Mobile executives have come out and said in very high profile manner that they are launching second-phase large scale trials for their homegrown 4G standard, TD-LTE, with an aim to wrapping those trials up by next June. (English article) It made the announcement even as the initial phase of trials ran into major problems when two of the vendors fell way behind schedule, meaning the trials couldn’t be properly completed. (previous post) China Mobile is clearly rushing ahead with these trials as it wants to commercialize its 4G standard as soon as possible, allowing it to quietly retire its problem-plagued 3G network based on another homegrown technology called TD-SCDMA. But this kind of rushing ahead while earlier work remains incomplete hardly seems like the right way to proceed, and I see major problems popping up in the future for TD-LTE that could delay the technology for months or even years if China Mobile isn’t careful.

Bottom line: Storm clouds are looming for China’s telecoms sector in the form of a government power struggle over industry regulation, and a rush to develop a homegrown 4G standard.

Related postings 相关文章:

◙ Telecoms Investigation Signals Profit Erosion 电信联通遭反垄断调查或侵蚀利润

◙ China Mobile’s TD 3G Fading Fast 中国移动3G网络前景黯淡

◙ China Mobile: Poor 3G Approach Yields Weak Results 中移动3G策略不当 拖累公司三季度业绩

I wanted to end today’s postings on a lighter note, looking at some of the latest silly reports coming out on the group buying industry that show just how unruly this sector has become and how it is badly in need of a clean up. In one of the latest reports, domestic media are saying McDonalds (NYSE: MCD) is denying it entered any tie-up to sell its meals at group-buying discounts through Gaopeng, the struggling group buying joint venture between newly listed Groupon (Nasdaq: GRPN) and leading Chinese Internet firm Tencent (HKEx: 700). (English article) It’s not at all clear what happened in this case, as the reports say that Gaopeng was offering just such deals to Beijing residents, so either the reports are wrong or McDonalds or Gaopeng are lying. Either way, this news once again underscores the chaos in the sector, whose credibility is near zero in the eyes of many consumers. In another report which looks almost like a joke, a consumer is complaining because he purchased a group-buying restaurant coupon on popular site 55tuan, and then asked for a refund when he failed to use the coupon by the expiry date, only to be told by 55tuan it didn’t provide refunds in such instances. (Chinese article) If 55tuan wanted to improve its image, it might actually consider a refund for this stupid consumer, who obviously doesn’t realize that a big piece of the profits for companies that offer group discounts probably comes from purchases of coupons that later are never used. Still, the fact that 55tuan, and probably none of its competitors, would offer refunds in this kind of case also reflects that the entire industry is losing big money due to overheated competition, and is badly in need of a clean up. The turbulent state of things was evident last week when industry leader LaShou was forced to temporarily halt its rocky New York IPO, reportedly to answer questions from the US securities regulator about its accounting. (previous post) I predicted that LaShou’s IPO application will probably now be quietly withdrawn and perhaps resubmitted next year. Of course that assumes that LaShou will still be in business next year, as I do sense that the group buying sector’s long awaited “correction” is likely to begin by the end of this year, leaving many casualties when it finally comes.

Bottom line: The latest reports of controversy in the group buying sector reflecting a state of near chaos in the space, with a correction likely as soon as the end of this year.

Related postings 相关文章:

◙ LaShou Shifts Focus in IPO March 拉手网在上市准备中有意转变战略方向

◙ China Regulors Threaten E-Commerce, Group Buying 官方监管威胁到电子商务与团购业务

◙ 55tuan: A Company in Denial 窝窝团拒不接受现实

China’s attempts in early fall to revive its struggling markets with a wave of IPOs for premier name companies had decidedly mixed results, but that hasn’t stopped a second group of major firms from announcing another wave of offerings set to raise more than $10 billion. (English article) Unlike the earlier wave of September and October offerings that saw a number of industry leaders make IPOs without much success, this new wave is composed mostly of names that are big but decidedly more middle-tier, leading me to suspect that many will be met with even less success. The latest wave of offerings has seen Sinochem announce plans to raise $5.5 billion in a Shanghai IPO (English article); New China Life seeking $2.5 billion in a dual Shanghai-Hong Kong IPO (English article); and China Railway Materials and Jiangsu Phoenix Media also seek to raise big amounts in Shanghai IPOs. Sinochem is a big name in its field, but all of the others are much less well-known. By comparison, the earlier wave of IPOs saw names like premier brokerage CITIC Securities (Shanghai: 600030; HKEx: 6030), industrial equipment giant Sany Heavy Industry (Shanghai: 600031) and Sinohydro Group (Shanghai: 601669), operator of the 3 Gorges Dam, all announce multibillion-dollar offerings in Hong Kong and Shanghai, in what looked like an orchestrated campaign by Beijing to try to add some excitement to its struggling stock markets. (previous post). CITIC Securities newly listed Hong Kong shares have done relatively well since their scaled-backed IPO in early October, but Sinohydro’s shares have slumped and Sany appears to have shelved its Hong Kong listing for now. Some are saying this latest round of IPO announcements is more a result of timing than any orchestrated effort by Beijing, as many of these companies have been waiting for a while now to list and may want to finally move ahead before the end of the year or risk having to wait until after Chinese New Year. Whatever the reason, these new IPOs are likely to fall flat if they move forward at all, and could even hurt the already-struggling broader markets by pulling investment dollars into their offerings.

Bottom line: A new wave of multibillion-dollar IPOs are likely to fall flat if they proceed, and could even hurt the broader slumping markets by drawing away investment dollars.

Related postings 相关文章:

◙ Beijing IPO Campaign to Boost Markets Falls Flat 大宗IPO提振中国股市或成泡影

◙ China Offers Up Premier IPOs to Revive Markets 大企业沪港上市 政府借机重燃沪港生机

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Baidu (Nasdaq: BIDU) may be China’s undisputed search leader, but others are certainly eying the market and its big profit potential, as evidenced by a major new campaign planned for next year by top Internet company Tencent (HKEx: 700) to promote its Soso search engine. (English article) This campaign looks interesting, especially for its big price tag, and underscores the fact that Tencent and others like Sohu (Nasdaq: SOHU) and Alibaba won’t just automatically yield this lucrative market to Baidu. Whether or not any of them will succeed is a different matter. According to domestic media reports, Tencent will spend a hefty 1 billion yuan, or about $150 million, to promote Soso next year, a large sum considering that Tencent has only invested slightly more, around 1.2 billion yuan, in Soso over the last 5 years combined. After years of failing to gain traction with its Sogou service, Sohu in its latest results pegged search as one area where it is finally gaining some traction, with its search revenue soaring more than 200 percent as it finally gained enough market share — around 2.2 percent — to register on industry radar screens. (previous post) Baidu is still the clear leader in the space with nearly 80 percent of the market, followed by Google (Nasdaq: GOOG) at a distant second. Soso still has yet to gain anything close to significant market share, despite its 5 years in business. But that said, Tencent has a number of factors in its favor that could help it succeed, especially if it really carries through with its massive promotional campaign next year. The company was a relative latecomer to the online game business, yet went on to draw on millions of users for its popular QQ instant messaging service to overtake giants like Shanda (Nasdaq: SNDA) and NetEase (Nasdaq: NTES) to become the top player. Its recent tie-up with Kaixin, China’s second biggest social networking site (previous post), could give it millions more potential users for its search service. This kind of access to potential users is important to grow a search business, but in my view the really critical factor is innovation. In order to really succeed and challenge Baidu, Sogou, Soso or anyone else will have to offer something new and better that Baidu doesn’t offer. Tencent has shown a good record at such innovation in the past, and will need to use that skill again in order to make its Soso succeed.

Bottom line: Tencent’s new 1 billion yuan spending campaign on its Soso search engine could have a good chance of success if it can support its promotional dollars with strong innovation.

Related postings 相关文章:

◙ New Lawsuit Has Potential to Bite Baidu 百度或因新侵权诉讼案“受伤

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

◙ Baidu, ZTE Earnings: More of the Same 百度和中兴财报：看上去没变化

It seems I may have been a bit premature last week in forecasting a prolonged slowdown for China’s hotel industry, as new results released from industry leader Home Inns (Nasdaq: HMIN) and number 3 player China Lodging Group (Nasdaq: HTHT) look a bit better than the weaker results from 7 Days (NYSE: SVN) that prompted my initial forecast. (previous post) Unlike 7 Days, which forecast a slowdown in revenue growth from the third to fourth quarters (previous post), both Home Inns and China Lodging, operator of the Hanting brand, forecast their revenue growth will accelerate over that period. (Home Inns announcement; China Lodging announcement). Home Inns forecast 26 percent revenue growth in the fourth quarter, or nearly double its rate in the third, while China Lodging forecast 40-45 percent fourth-quarter growth, again nearly double its third-quarter rate. All 3 companies cited a lingering “Expo hangover” for a difficult third quarter, since the Shanghai Expo helped to strongly boost their performance in 2010’s third quarter but was absent this year. An important part of the growth equation for both Home Inns and China Lodging, which 7 Days lacks, is the franchised business, which offers higher profit margins and makes opening of new hotels faster, facilitating quicker growth than the traditional self-managed hotels business. Both Home Inns and China Lodging reported their franchised hotel business few by more than 40 percent in the third quarter, far faster than their overall hotel business. Home Inns also consolidated its place as the clear industry leader by closing its purchase of Motel 168, which will immediately boost its revenue by a third and raise its hotel count to around 1,300 — clearly ahead of 7 Days, the second biggest operator with 838 hotels. Meantime, leading online travel services firm Ctrip (Nasdaq: CTRP) released third-quarter results over the weekend that showed a less robust picture, with revenue growth expected to slow to 15-20 percent in the fourth quarter from 20 percent in the third. (company announcement) Among its various segments, hotel bookings was the weakest with just 17 percent growth, most likely reflecting the Expo effect and perhaps a broader cooling economy. That means the broader hotel segment may still be looking at moderating growth in the year ahead.

Bottom line: New results from Home Inns and China Lodging show a resumption in accelerating growth for the hotel sector, with franchised hotels playing an increasingly important role.

Related postings 相关文章:

◙ Hotels: Expo Hangover Set to Linger into 2012

◙ China Hotels: Is the Holiday Over?

◙ 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