Chinese Tech Stock Weekly Summary (7/21-7/27)

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 |  Includes: BIDU, CHA, CHU, CN-OLD
by: IRG Ltd

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

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Internet

  • Baidu.com Inc. (NASDAQ:BIDU) expanded its lead over Google Inc. (NASDAQ:GOOG) in China's search engine market in the second quarter. In the three months ended June 30, Baidu had 64.4 percent of the search engine market by revenue, up from 60.7 percent in the first quarter. Google's share of the market fell to 26.1 percent in the second quarter from 26.8 percent in the first quarter. China's total search engine revenues rose 87 percent from a year earlier to 1.23 billion yuan (US$180.3 million) on increased advertising spending by small and medium-sized enterprises. Beijing Olympics in the third quarter will likely drive increased demand for Web searches in China and further advertising spending by small and medium enterprises.

Telecommunications

  • Huawei Technologies has picked two consortia in a shortlist of five private-equity bidders for a stake of around 50% in its mobile-devices unit. The first consortium comprises Silver Lake Partners L.P. and Providence Equity Partners Ltd. and the second consortium comprises AEA Investors and General Atlantic LLC, though one of the people familiar with the situation said the companies in the consortia could change. Bids for the stake in Huawei's mobile-devices unit average around US$2 billion, people familiar with the situation said earlier. The other shortlisted bidders are Bain Capital Partners LLC, Goldman Sachs Group Inc.'s private-equity arm, and Kohlberg Kravis Roberts & Co. The five bidders are doing due diligence on Huawei's mobile devices unit, a process set to take a few more weeks before the second round of bidding.
  • China Telecom (NYSE:CHA) plans to issue up to 50 billion yuan (US$7.3 billion) worth of bonds in the domestic market for business development. The bonds would have a maturity of up to 10 years, China Telecom said in a statement. The company will hold an extraordinary general meeting on September 5 in Beijing to seek shareholders' approval for a general mandate to issue up to 80 billion yuan (US$11.7 billion) worth of debentures, including the 50 billion yuan (US$7.3 billion) bond issue, from a previously approved 60 billion yuan (US$8.7 billion).
  • Mainland fixed-line operators are intensifying their marketing efforts for internet protocol television [IPTV] services as demand increases for more interactive and on-demand viewing in the run-up to the Beijing Olympics, according to industry watchers. China Telecom and China Netcom (CN-OLD) launched the service in 2004 on a trial basis. They partnered with broadcasters Shanghai Media Group and China Central Television to source content. China Central Television is the sole broadcaster for the Olympics, which will be delivered through terrestrial and cable television as well as the IPTV platform. ZTE had already deployed 20 IPTV operations on the mainland and the firm expected fixed-line operators would boost investment in network capacity this year to meet growth momentum.
  • China Telecom's IPTV Laboratory was recently established in Shanghai. The IPTV business is an important part of China Telecom's digital home strategy and a key point in its strategic plan to expand to other business lines. The company has so far introduced the IPTV business in Shanghai Municipality, and in Guangdong and Fujian Provinces. The new lab will make full use of China Telecom Shanghai Research Institute's IPTV development environment and will rely on Shanghai's existing IPTV networks to promote the development and standardization of IPTV products.
  • MediaG3 has entered into a partnership agreement with Beijing Digital Media to provide broadband wireless applications and services for interactive digital TV and internet access. Beijing Digital Media is a joint venture among China SARFT, China Aerospace New World and Zhong Guang Cable and Information Technologies [CCIT]. This partnership agreement between MediaG3 and CCIT is the first phase of cooperation for development, technology license, application deployment and information services for tens of millions CCIT and other digital cable TV/internet service subscribers.

Wireless

  • After China Telecom took over the CDMA network from China Unicom (NYSE:CHU), the company is now trying to get access to 800MHz frequency. Most CDMA cell phones has merely single mode of 800MHz, if China Telecom cannot get access to 800MHz, the single-mode CDMA cell phones will not be available for use. An analyst close to China Telecom says that China Telecom will be sure to get 800MHz frequency because related authorities will not let that situation happen. As per international roaming, CMDA networks of foreign telecom carriers are running at 800MHz frequency, so it will be fair and reasonable for China Telecom to use it too. China Unicom will officially deliver the CDMA network to China Telecom from September 30.
  • Latest statistics from the Ministry of Industry and Information indicate that the number of cell phone users increased drastically in June, while fixed line telephone users continued to fall. And the number of broadband Internet users was growing steadily. By the end of June, China saw 957 million telephone users. Cell phone users hit 601 million. The number of telephone users reached 461 million in the more developed Eastern China, 286 million for Central China, and 206 million for Western China. Newly added broadband Internet subscribers were 9.6 million, 1.6 million in June alone, brining the total number to 76 million. In the meanwhile, the dial-up Internet subscribers decreased 3.4 million. Major Chinese telecom carriers recorded total sales of 398.8 billion yuan (US$58.5 billion), representing an increase of 9.2%. Fixed telecom asset investment was 113.6 billion (US$16.7 billion), up 9.9% year on year.

Hardware

  • The total number of sales outlets of Dell (NASDAQ:DELL) in China will be 3,000 by the end of 2008, according to an executive of Dell China. By now Dell has 1,800 special stores in China, in contrast to 100 to 120 one year ago. With the helps from local partners, Dell is set to branch out into 1,200 cities around the country next year. During the past year, Dell PCs have been put on shelves of chain stores of retailing giants such as Gome, Suning, HISAP, Wal-Mart, Carrefour, BestBuy, and Staples.