Chinese Tech Stock Weekly Summary (Apr. 20 - Apr. 26, 2009)

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

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Mobile/Wireless

• Nokia (NOK) shipped 17.9 million mobile devices to China in the first quarter of 2009, down 14.8 percent compared to the first quarter of 2008, but up 38.8 percent compared to the fourth quarter of 2008. China was the only region in which Nokia saw a quarter-on-quarter increase in shipments in the first quarter of 2009. The company also said that its market share shrinkage in Latin America, Europe and the Asia-Pacific was offset by its market share increases in China, Middle East and Africa and North America. China's domestic mobile phone shipments have been decreasing on a quarterly basis since the first quarter of 2008, although they rallied in the first quarter of 2009 due to increased consumer spending over the Chinese New Year holiday, which fell during the end of January. All major global handset companies apart from Samsung experienced a decrease in revenues for 2008.

Telecommunications

• China Unicom (CHU) announced a net addition of 1.848 million GSM users in March, which brought the total number to 137.692 million. The carrier's fixed-line service subscribers climbed 223,000 and its broadband users grew 927,000 in March, bringing the user base to 109.167 million and 32.614 million respectively.
• As the nation's operators gear up for the launch of 3G services, iSuppli expects Chinese operators to spend US$6.2 billion on wireless infrastructure equipment, a 13.2 percent increase over 2008 while global spending will slump by 3.5 percent to US$39.7 billion. China Mobile (CHL) is expected to continue to roll-out its nationwide TD-SCDMA network, while China Unicom is expected to launch W-CDMA services in the second half of this year. China Telecom (CHA), meanwhile, has began securing vendor quotes for the build-out of its CDMA2000 network. Spending in India, the second fastest growing nation, will increase by a relatively small 4.5 percent. Indian operators will be cautious with their 3G investments, seeking to conserve cash following expensive spectrum acquisitions. The bulk of India's 3G spend will occur next year.
• Huawei Technologies Co. said profit rose 20 percent in 2008 despite significant losses due to currency fluctuations, even as rival telecommunications equipment makers saw profits shrink because of the weakening global economy. Huawei said in its annual report that net profit for the year ended Dec. 31 was US$1.15 billion, up from US$956.9 million a year earlier. Revenue grew 43 percent last year to US$18.33 billion, slightly higher than the unaudited revenue figure the company initially reported in January. By contrast, Telefon AB L.M. Ericsson (ERIC) posted a 47.3 percent drop in net profit for 2008 to 11.67 billion Swedish kronor (US$1.36 billion), and Alcatel-Lucent (ALU) said its net loss widened to 5.17 billion euros (US$6.9 billion).
• China Mobile reported a net profit of 25.2 billion yuan (US$3.7 billion) for the first quarter of this year, representing an increase of 5.2 percent from the same period of last year. The carrier's operating revenues in the three months grew by 9.2 percent year on year to hit 101.3 billion yuan (US$14.8 billion). In the period, the telecom giant saw a net increase of 19.91 million mobile phone users, vs. the 21.14 million net addition in the same period of 2008. With an average monthly net increase of 6.638 million mobile service subscribers, China Mobile remains the industrial leader in the telecom sector. The firm ascribed the slowdown of user number growth to negative impact of sluggish macro-economic development on communications consumption demand, shrinking room for users growth induced by rising mobile phone penetration rate, as well as intensified competition after the reshuffle of China's telecom industry. China Mobile's ARPU (Average Revenue Per User) in Q1 declined 12 percent from 83 yuan (US$12.2) a year ago to 73 yuan (US$10.7), and the MOU (Minute of Use) slid from 478 minutes to 487 minutes, as most of the company's net addition of users were low-end users, and the implementation of new charging policy took effect as well.
• High-speed Internet access and video calling ranked as the most popular functions of 3G handsets in a recent poll of Chinese consumers. Of the 2,903 people surveyed by iResearch, 78.9 percent voted high-speed Internet access as their favorite 3G function, while 67.3 percent voted for video calling. Other popular functions of 3G handsets were mobile business features, GPS and mobile gaming. Of the basic specifications the respondents consider when choosing a 3G handset, 61.2 percent said the operating system is the most important. The widescreen bar phone was the most popular design for 3G handsets, with 58.6 percent of those surveyed claiming a preference. More than half of consumers think a reasonable price for a 3G handset would be somewhere between 1,000 yuan (US$146.35) and 2,000 yuan (US$292.7). Nokia topped polls as the most desirable brand of 3G handset. iResearch said that adopting a strategy of offering extremely low prices would not be good for the long-term development of handset companies at the beginning of the 3G era. Meanwhile, the general preference among users in China for big-brand handsets will leave very little opportunity for small companies to promote their 3G handsets. For such companies, producing niche 3G handsets is the only viable course of action.

Media, Entertainment and Gaming

• Hurray! Holding Co., Ltd. (HRAY), engaged in artist development, music production and wireless music distribution and other wireless value-added services in China, announced the promotion of Xiaoqing Guo to Chief Financial Officer (CFO) and Vice President effective immediately. Ms. has been with the company since December 2003.