Chinese Tech Stock Weekly Summary (4/21-27)

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

Internet

• Baidu.com (BIDU) has launched a new platform for online games, which could help its partners promote their game products. Baidu will share the business revenues from online games with its partners by providing them with the promotion channel. Among six games Baidu’s new platform covers, one is from Shanda Interactive Entertainment Ltd. (SNDA), and the other five are from newly established companies, as Baidu focuses on middle and small game companies. Baidu will not develop games or serve as an agent.

Mobile/Wireless

• Ericsson (ERIC) was honored with the title of "China Green Company" in a national selection due to its continuous commitment to innovation in environmental protection in China. The selection was made by China Entrepreneur magazine, Daonong Enterprise Institute and Guanghua School of Management of Beijing University. During this selection, green has been defined as the harmonious co-existence not only between man and nature, but also among human beings, the latter of which includes the relationship between entrepreneurs and the public, as well as between enterprises and society.
• China Mobile (CHL) said its first-quarter net profit rose 37 percent as it continued to add subscribers. China Mobile said its net profit for the three months ended March 31 rose to 24.10 billion yuan (US$3.45 billion) from 17.56 billion yuan (US$3 billion) a year earlier and earnings before interest, taxes, depreciation and amortization [EBITDA] rose 22 percent to 49.78 billion yuan (US$7.1 billion) from 40.72 billion yuan (US$5.8 billion) a year earlier, while its EBITDA margin rose to 53.5 percent from 52.4 percent.

Telecommunications

• SK Telecom (SKMTF.PK) is approaching China Telecom (CHA) for a possible joint venture to operate in the mainland's mobile market using code division multiple access [CDMA] technology. Under the restructuring, China Telecom would acquire China Unicom's CDMA network to help it defend its decreasing market share as landline users switch to the platform offered by China Mobile. SK Telecom, which owns 6.62 percent of Unicom, is making plans before the official announcement of the reform. The company would not enter into talks for a strategic investor before the government granted it a full-service operator status.
• Nokia Siemens Networks has been contracted by China Netcom (CN) to guarantee information security for its data communication network [DCN] covering 31 provinces, municipalities and autonomous regions of China. Nokia Siemens Networks has built a complete information security management system for China Netcom covering assessment, consulting, design, systems integration and project management. The portfolio is aimed to reduce potential losses caused by information security risks, support the development of China Netcom's services and will thus reduce operational expenditures.
• China Telecom’s net profits slightly went up by 0.5 percent in the first quarter to 6.25 billion yuan (US$894 million). The China Securities News cited the company's quarterly report that its operating income hits 43.6 billion yuan (US$6.3 billion) during the Jan-Mar period, up 1.6 percent year on year. EBITDA amounted to 22.67 billion yuan (US$3.2 billion), up 0.4 percent. The number of fixed line subscribers went down by 3.16 million to 217 million users, while the broadband subscribers rose by 2.06 million to reach 37.71 million, which is 3.82 million more than that of the same period of 2007.
• China Telecom Corporation has recorded a block trade deal for a total of 9.6 million shares. The shares were sold at HK$5.29 a piece. The deal amounted HK$50.78 million in total.
• eServGlobal Ltd has won a contract from China's ZTE Corp to provide prepaid mobile recharge services to Nepal Telecom's subscribers. Nepal Telecom will use eServGlobal's eRetail and eVoucher solutions to provide voucher-based recharge as well as electronic recharge to their clients. The project will start immediately and will conclude by December 2008.
• Henan has become the fifth province in China to have more than 50 million telephone users after Guangdong, Jiangsu, Shandong and Zhejiang Provinces. All of the Province's administrative villages now have access to telephones.
• China Satellite Communications Corporation (China Satcom) decides to contribute some frequency bands ranging from 3.4GHz to 3.7GHz for the LTE (Long Term Evolution) development. Nicknamed as 3.9G, LTE is considered as a mainstream evolution technology from 3G to 4G. It has 100Mbps data download capacity. China Satcom plans to use some satellite applications in remote areas, then more satellite and microwave frequency bands will be used for developing wireless broadband and LTE in the urban areas. China's radio and television authorities consent to provide some 700MHz analog TV frequency bands for the development of wireless broadband after the completion of the country's analog-to-digital conversion.

Media, Entertainment and Gaming

• Perfect World (PWRD) will invest US$3 million in Chengdu Seasky Digital Entertainment and take a minority stake. Seasky is a high-tech company with experience in designing and developing massive multiplayer online games. It developed the 2D turn-based massive multiplayer role-playing online game, ‘Heavenly Sword and Dragon Sabre'. It has also engaged in the research and development of Java technology.
• The9 (NCTY) has, through a wholly-owned subsidiary, entered into an agreement with Ndoors, a game developer in South Korea, for a licence to operate 'Atlantica', a 3D massively multiplayer online role-playing game in mainland China. The term of the licence is for three years from the commercial launch date of the game in mainland China.
• Sohu.com (SOHU) has signed with SK Telecom to share original Internet content with each other. Under the partnership, Sohu will be entitled to publish the original video products owned by SK Telecom. SK Telecom, in return, will be able to share parts of Sohu’s resources via Melon, a music website under SK Telecom. The two parties will also join hands in the fields of film and television project investment, as well as wireless operation.

Hardware

• Huawei Technologies Co., Ltd. is planning to produce consumer WiMAX equipment by itself, worrying about higher costs of outsourcing the production to Taiwan original equipment manufacturers. Huawei will introduce chip solutions from affiliated HiSilicon Technologies Co., Ltd. Its WiMAX equipment will be available in the market in 2009. The decision may disappoint several Taiwan network equipment suppliers that have gotten interoperability test certificates from the Shenzhen-based telecommunications network provider. Currently, ten Taiwan companies handle all the production of Huawei's WiMAX equipment, including Alpha Networks Inc., Gemtek Technology Co., Ltd., and Quanta Computer Inc.