Chinese Tech Stock Weekly Report

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

Media, Entertainment and Gaming

• China Unicom NewSpace Co, Ltd. announced that it will officially initiate the broadcasting of Global Music International’s collection of music videos from both Chinese and Western musicians on the cellular network of China Unicom (CHU). The agreement is expected to allow China Unicom NewSpace to be one of first to deliver music video content to the mobile platform. The company will gain access to innovative, international content that will allow its parent, China Unicom, to maintain and grow market share through customer acquisition. Under the partnership, Global Music International gains potential new reach into China Unicom’s 36 million CDMA subscribers for music video content and all of its 141 million subscribers for ring tone services. Global Music International partnered with China Unicom through China Unicom NewSpace, is the subsidiary responsible for the carrier's wireless music services, among other rich mobile media content.

• Xinhua Finance Media announced plans to sell 23 million American depositary shares on the NASDAQ Global Market at an estimated price of between US$12 to US$14 per ADS. The company, with links to state-run Xinhua News Agency, said it plans to raise up to US$371.5 million in an IPO in New York. The company said underwriters have the option to buy up to 3.4 million additional shares from Xinhua Finance Media and existing shareholders. The filing indicated that, after the share sale, Xinhua Finance Media's parent company, Xinhua Finance Ltd., will hold a 36.7 percent stake, with Patriarch Partners Media Holdings holding 8 percent and founder, chairman and CEO Fredy Bush holding 5.8 percent. Xinhua Finance will still hold effective control of 85.3 percent of Xinhua Finance Media's voting rights. JPMorgan, UBS Investment Bank, CIBC World Markets, WR Hambrecht & Co. and ABN AMRO Rothschild are listed as underwriters for the offering. Xinhua Finance Media, which provides business and financial news, wealth management and "affluent lifestyle" programming, said the funds generated by way of the offering will be used to pay off about US$50 million in debt to Xinhua Finance and other affiliated companies, with the remainder to be used for strategic acquisitions and other purposes. Xinhua Finance Media posted in 2006 a profit of US$3.3 million.

Mobile/Wireless

• China Mobile (CHL), the mainland's largest mobile service operator, registered a record 4.8 million new subscribers in January, a performance that the company attributes to its foray into rural areas and its newly introduced free incoming-call packages. The company said it had 306 million users by the end of last month. In a separate report, China Telecom (CHA) earlier announced weak January subscriptions figures. According to brokerage CLSA, China Mobile “will likely gain more dominance with the delay of 3G licensing, as it will face only limited competition in 2007 from fixed-line operators.” Anticipating the release of 3G licenses, China Telecom and China Netcom (CN) stopped their respective investment last year in their limited wireless service Xiaolingtong, which they used to try to counter China Mobile's efforts to lure their subscribers. The 3G licenses were expected to be released as early as the fourth quarter of last year. China Mobile added 4.8 million users in December last year. China Telecom, the mainland's largest fixed-line operator, said it registered only 250,000 new users last month, down from 640,000 in December. Total users of the fixed-line service reached 223 million. The broadband service added 760,000 users last month, bringing the total number of broadband users to 29 million, up from 28.3 million in previous months.

• Millicom International Cellular S.A. announced that it has completed the sale of its 88.8 percent shareholding in Paktel Limited to China Mobile Communications Corporation, which finalizes Millicom’s exit from Pakistan. Millicom International Cellular S.A. is a global telecommunications investor with cellular operations in Asia, Latin America and Africa. It currently has cellular operations and licenses in 16 countries. The company’s cellular operations have a combined population under license of approximately 280 million people.

• According to the country’s top telecommunications operator, China Mobile, Chinese people would send more than 14 billion greeting text messages during the weeklong Spring Festival holiday. The figure is excellent income for professional message writers who write for websites that provide downloading services to message seekers. According to a source in China Mobile, in the past week, some productive text message writers earned more than 10,000 yuan (US$1,280), estimated to be equivalent to their average monthly income. Industry sources said subscribers want unique and ingenious messages to extend greetings and bring joy and fun to their friends. The market also demands that writers have basic training in art and music in order to come up with multimedia messages.

• Huawei Technologies Co Ltd of China said sales of its first customized Vodafone-branded 3G handset jointly developed by both companies, the V710, has reached its 500,000th across 14 European countries since its launch in September 2006. The two companies also celebrated the first year anniversary of their strategic 3G handset partnership and plan to enhance their partnership in 2007. In 2007, the two companies said they will deepen their co-operation in design concepts and customization, rolling-out a series of jointly developed Vodafone-branded 3G devices.

Hardware

• U.S.-based Advanced Battery Technologies Inc announced that its wholly owned subsidiary, ZQ Power-Tech, was issued a patent of invention by The Intellectual Property Bureau of China for the invention of the nano material lithium-ion battery and its technology process. The in-house R&D team worked jointly with experts from Harbin Institute of Technology [HIT] on this project to make this technology ready for commercialization. Compared to other lithium-ion battery technologies, the nano material batteries is expected to have a greater power capacity, longer cycle life and shorter recharge time; therefore it enjoys great potential for application in powering electric vehicles. The company believes this patent represents a technology breakthrough in step with the industrial trend.

Telecommunications

• According to the China Equity Exchange Information Center, China Network Communications Group (Netcom), the mainland's second-largest fixed-line operator, is aiming to derive at least 318 million yuan (US$41 million) for its 50 percent stake in a broadband service venture with PCCW. A source claimed that PCCW deputy chairman Edward Tian Suning is leading a consortium to join the bidding for the asset. CNC Broadband was set up in 2005 to offer broadband access services in Hangzhou and Ningbo as part of the two companies' joint expansion plans on the mainland. China Netcom Group (CN) bought a 20 percent stake in PCCW for US$1 billion in early 2005. No confirmation was made from any of the sources in the company.

• According to an official of the Ministry of Information Industry [MII], the total investment in 3G telecom network construction in China is estimated to reach 114.1 billion yuan (US$14.7 billion) in the first year after its commercial launch. The report said the number of users of 3G services is forecast to reach 10 million in one year. The official said the 3G commercial launch needs a two-year "warm up" period before 3G services can establish its prevalence in the country. In the meantime, the report indicated that during the two-year period, 2G services still dominate, with its number of users seen as posting a growth at a relatively slow pace. When the 3G-network coverage is completed, the 2G-network will phase out, the report said. With 3G technologies, users are expected to enjoy multimedia services, including instant messaging and mobile TV, even as the average revenue user for 3G would not be much higher than that for other mobile users in the mainland.

• ZTE Corp of China announced that it has signed an agreement with Samsung of Korea to jointly work on the research and development of WCDMA-based Home NodeB products. The Home NodeB, also referred to as femtocells, will be specifically designed to manage indoor telecommunications and enable new broadband network applications, such as assisting in the convergence of fixed and wireless telecoms in the home. The Home NodeB optimizes the in-building 3G experience for the subscriber within their home or work place. A typical Home NodeB can automatically transfer a call session between the mobile network and the user's home DSL connection, as well as enable wireless computer networking, broadband Internet access and fixed line VoIP services all via the one device

Semiconductors

• Elpida Memory, Inc. announced it will sell its 200-mm wafer processing equipment to Cension Semiconductor Manufacturing Corp. (Cension) of China. Cension is a company that is engaged in contracted manufacturing of semiconductors and the production base of Semiconductor Manufacturing International Corp. (SMI) of China. SMI will run the transferred equipment as well. The companies will discuss details including a schedule.