Chinese Tech Stock Weekly Summary (Oct. 20-26, 2008)

 |  Includes: BCE, BIDU, TU
by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

• • •

Internet's (NASDAQ:BIDU) third-quarter net income rose 91 percent to 347.9 million yuan ($51.2 million), boosted by strong usage during the Beijing Olympics. Revenue rose 85 percent to 919.1 million yuan ($135.4 million). In July, the company forecast growth of 82 percent to 88 percent to 905 million yuan ($132.2 million) to 935 million yuan (US$137 million). At that time, Baidu expected
users to flock to its site during the Beijing Olympics in August to get information about the games, but warned there could be a decrease in business-related searches. Active online-marketing customers jumped 36 percent to about 194,000, and revenue per customer also grew 34 percent.


• Madhouse Inc., China's mobile advertising network, announced that Nokia Growth Partners, part of Nokia's (NYSE:NOK) venture capital arm, has completed an investment in the company. Madhouse managed several mobile advertising campaigns for Nokia during the past year and is working closely with Nokia as it expands its software and services initiative in China.


China Mobile Ltd. (NYSE:CHL) reported its third-quarter net profit rose 26 percent from a year earlier as it continued to add subscribers, while fixed-line operator China Telecom Corp.'s net profit fell 2.2 percent in the same period due to a decline in its user base. China Mobile posted a net profit of 27.7 billion yuan ($4.1 billion) for the three months. Revenue rose 14 percent. The figures were derived by subtracting first-half results from figures China Mobile released for the January-September. China Mobile's third-quarter net profit came in lower than the average forecast of 30 billion yuan ($4.4 billion). China Mobile's worse-than-expected third-quarter results are attributable to the company's recent expansion into rural markets, higher maintenance costs from several natural disasters earlier this year and campaign disruptions during the summer Olympic Games.

China Telecom (NYSE:CHA) is unlikely to compete with China Mobile in mobile business in an all-round manner and instead, the company would tap some distinctive businesses through integrating mobile resources and its fixed network. The CDMA users only account for five percent of the total mobile business in China, in comparison with the 500 million users of China Mobile, so the company would launch some fresh businesses that neither China Mobile nor China Unicom ever tried. China Telecom has completed the merger of CDMA network and vowed to keep the CDMA business to guarantee the continuity. The telecom giant showcased its mobile brand, Surfing, which is customized to individual users, at a telecom exhibition and would launch the CDMA 189 number segment for the brand in the next month. Besides, the company would take advantage of CDMA plus WLAN to improve its data processing capability amid softening voice business.

China's total telecom business volume reached 1.7 trillion yuan ($248.3 billion) and telecom business revenues added up to 610 billion yuan ($89.1 billion) in the first nine months, rising 23.2 percent and 8.3 percent from the period last year. Investments in fixed-assets in the telecom industry amounted to 167 billion yuan ($24.4 billion), up 9.2 percent from a year ago. Fixed-line phone business continued declining while mobile telecom business kept robust growth. Revenues from mobile communications and data telecommunications leaped 15.7 percent and 39.5 percent year on year to 333.2 billion yuan (US$49 billion) and 58.4 billion yuan (US$8.5 billion) but revenues from fixed local phone and long-distance phone businesses fell 7.4 percent and 5.7 percent to 130.04 billion yuan ($19 billion) and 87.59 billion yuan (US$13 billion), respectively accounting for 54.6 percent, 9.6 percent, 21.3 percent, and 14.4 percent of the total telecom revenues. Telecom carriers saw continuous decreases in fixed-line phone users but fast growths in mobile phone subscribers. The number of fixed-
line phone users withered 12.5 million to 353 million and mobile phone users surged 76.7 million to 624 million.

Huawei Technologies has won contracts to build UMTS/HSPA networks for Canadian telecom operators Telus (NYSE:TU) and Bell Canada. The networks are expected to be completed in 2010. The company did not provide financial details. Bell is a wholly-owned unit of BCE Inc (NYSE:BCE), Canada's largest communications company, while Telus is Canada's second largest telecom operator with 11.4 million registered users.