China Stocks Weekly Update: FMCN, LNVGY, CHCG

Internet

Shin Satellite of Thailand announced that it has signed an agreement to provide broadband Internet services to China through the company's iPSTAR satellite. ShinSat, is owned by Thai telecom giant Shin Corp and provides telephone, internet, television and other communication services. The company said it has already set up a satellite gateway in Beijing that will begin providing Internet services to clients in May. Two more gateways are planned in Shanghai and Guangzhou. The service cost about US$1,000 a year in China and would bring in revenues of US$1 billion a year if the company met its target. At present, ShinSat already offers broadband satellite services in Southeast Asia, as well as Australia and New Zealand, with the services in Vietnam set to be launched soon.

Mobile/Wireless

With a forecast that it will post a growth of 4,300 percent, China's mobile phone cartoons market size went beyond 720,000 Yuan (US$90,000) in 2005, according to Analysys International. The report said the number of registered users hit 120,000. The Internet-based provider of business information about technology, media and telecom industries in China said the growth in the market will be hitting 31.6 million Yuan (US$4 million) in 2006. This market size is seen reaching the value of 624 million Yuan (US$77.8 million) in 2010. Analysys International says the mobile cartoon market in China is currently in the initial stage and that there are some market inhibitors to be solved. These inhibitors include the low penetration rate of high-end mobile handsets that support multimedia applications and the small number of mobile phone users using mobile phone cartoons. The market is expected to show fast growth in 2006 and 2007.

China 3C Group (CHCG) announced signing a sales agent agreement with VK Telecom (China) Co. Ltd., a leading South Korean cell phone manufacturer. The one-year agreement will allow China 3C to be the exclusive sales agent in the Zhejiang province of China, for five VK Telecom cell phone models. China 3C Group is a large-scale enterprise integrating the selling, circulation and modern logistics of 3C products (communication product, information technology products and digital products) in China through its two subsidiaries: Yiwu Yong Xin Telecommunication Co. Ltd., an authorized sales agent, focusing on the sale, circulation and modern logistics of fax machines and cord phone products in China, and, Hangzhou Wang Da Electronics Co. Ltd., an authorized sales agent focusing on sales, circulation and modern logistics of cell phones, cell phones products, IT products, and digital products in China. China 3C Group also disclosed that it has plans for a NASDAQ SmallCap Market listing.

Media, Entertainment and Gaming

Focus Media Holding Ltd. (FMCN) announced the launching of its outdoor LED- advertising network, a move that is seen as boosting the firm’s out-of-home media coverage. The ads are aimed at urban consumers with above-average income. Presently, Focus Media's outdoor LED network consists of approximately 70 LED digital billboards installed on the street-sides in major shopping districts and other locations in Shanghai with high pedestrian traffic. Focus Media is considered China's largest outof-home multi-platform lifestyle media company.

Interactive Television Co. Ltd. announced the signing of an agreement with Dalian Tiantu Cable TV Co. Ltd., to launch a high definition TV program in Dalian in May. Ths agreement is expected to bring to Dalian high definition TV signals earlier than other cities like Shanghai, Foshan, Shenzhen and Nanjing in China. An official of Dalian Radio and Television Bureau, said about 300,000 families in Dalian have switched to digital television while another 500,000 will follow suit by the end of this year.

Sun Media Investment Holdings announced the development of the first dedicated home shopping channel for luxury goods on the mainland. The company said it has entered into an agreement with Europe's Luxe.TV, the operator of a soon to be launched global digital television network geared for high-end consumer goods, to create an interactive platform for mainland viewers to buy goods over the Internet. The joint venture, Luxe.TV Interactive, will launch its Internet protocol television channel towards the end of the year. Financial terms were not disclosed. A top official of Sun Media said the Chinese market is ready for the Luxe TV concept. A study made by Ernst & Young indicate that demand for luxury goods on the mainland has reached an average of US$2 billion in annual sales and is expect to reach US$11.5 billion by 2015 when the country would account for 29 percent of all luxury goods purchases worldwide. Sun Media runs Asia Multi-Media Technology Services Holdings, which owns a 34,880-km national IP fiber optic network servicing 440 mainland cities. Other Sun Media investments include television and multimedia production enterprises and more than 10 cable and satellite television channels on the mainland and in Hong Kong, Taiwan, Singapore, Malaysia, Australia, New Zealand and North America. Sun Media Investment Holdings is one of China's largest investment groups.

Hardware

Samsung (China) announced its plan to reduce production costs by increasing the scale of purchase in China, with the amount expected to reach US$18.5 billion in 2006. Samsung’s International Purchase Center in China reached a total of US$15.3 billion in 2005. The company said it has moved its Hong Kong International Purchase Center to Shanghai in December, a move seen as aimed at easing the increase in procurement volume in China. The company also announced the change in the name of the center to China International Purchase Center. With ten offices, the center makes it purchases from Hong Kong, Shenzhen, and Tianjin.

Lenovo Group Ltd. (LNVGY), Founder Group, Tsinghua Tongfang and TCL Corp. TCL announced that they will sign purchase orders worth US$700 million with Microsoft (MSFT). Within the figure, TCL’s purchase accounts for US$60 million, Tsinghua Tongfang US$120 million, Founder US$250 million, and Lenovo US$27 million. The agreement between the four PC producers will all be for three years. Lenovo and Founder will each sign the contracts by themselves as Microsoft’s strategic partners in the Asia-Pacific areas. Tsinghua Tongfang and TCL, together with China Mobile Communications Corp. (China Mobile) and China Construction Bank CCB, will sign the contracts with Microsoft.

Telecommunications

Figures released by the country’s Ministry of Information Industry MII indicated that revenues from China’s postal and telecom sector reached 169.2 billion Yuan (US$21.1 billion) in the first quarter this year, a figure representing an 11.8-percent increase year on year. Within this figure, the report said the postal bureau’s revenue registered a 13.7-percent rise to 15.8 billion Yuan (US$2 billion), with the telecom revenue rising by 11.6 percent to 153.4 billion Yuan (US$19.1 billion). By the end of March, the number of China’s fixed line users rose to 358.7 million, representing 8.3 million more than the previous quarter, while the number of mobile phone users grew to 409.6 million, representing an increase of 16.2 million from the previous quarter. The report also said that the volume of text messages posted a 47-percent year-on-year increase to 98.8 billion.

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