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Matthew Burlage is the founder and Chief Executive Officer of IRG and has primary responsibility for the firm’s strategy and financial advisory business across the Asia Pacific region, including Japan. Matt is also responsible for the firm's proprietary investments. Matt has spent the last... More
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  • IRG Technology, Media and Telecommunications Weekly Market Review (Week of 12 – 18 Oct 2009) 0 comments
    Oct 21, 2009 02:54 AM

    Japan

    Semiconductor    
    •         Elpida Memory Inc., which secured a US$2 billion lifeline in September including public money, is planning to join industry leader Samsung Electronics Co. in a new round of technology spending to widen its lead over smaller Taiwanese makers of dynamic random access memory (DRAM). Spot prices of DRAM are now more than double what they were a year ago. Analysts credit demand rises for cutting-edge chips for high-performance computers as well as procurement by Chinese brokers following the National Day holiday in early October. DRAM prices will peak in the first half of October.
    •         Japan's Elpida Memory Inc. will raise its stake in its Rexchip, its Taiwan venture with Powerchip Semiconductor Corp to above 70 percent by the year's end. Elpida raised its stake in Rexchip to 64 percent from 52 percent earlier. It has acquired 350 million Rexchip shares from Powerchip Semiconductor Corporation (PSC) as partial repayment of the loan interest and principal to strengthen the management of the consolidated subsidiary’s operations. Elpida Memory Co. Ltd. provided PSC with a short-term loan. Elpida and Elpida Memory merged with PSC to settle the loan obligation.

    Telecommunications

    •         Japan International Cooperation Agency (JICA) has agreed to finance the construction of a submarine electric transmission cable between Java and Sumatra. JICA will provide a loan of US$1.87 billion for the US$2.2 billion project and PLN, which owns the project, will put up the rest. The loan is for 30 years with a grace period of 10 years carrying an annual interest rate of 0.3 percent. Construction of the 700 kilometer cable project will start in 2011, and it is to be completed in 2016. The project will link the Sumatra systems and the Java-Madura-Bali interconnections.
    Internet
    •         Interlink Co. of Japan merged with RegistryASP for provisioning of new gTLD registry solutions and services. Interlink and RegistryASP will be sponsoring the upcoming ICANN meeting Seoul. The two companies will encourage and advocate Asian Internet communities' participation in the new gTLD application as part of the Asia.
     
    Korea
    Telecommunications
    •         Internet home phone business of LG Dacom will surpass 2 million subscribers this month for the first time in the industry after reaching 1.91million in the end of last month for my LG070 service subscribers. The firm attributed cheap fee system such as free calling to increase, and word of mouth among house makers were effective. Sales revenue was up 502 percent from Won 18.3 billion in 2007 to Won 109.9 billion last year.
    •         LG Telecom Ltd. plans to merge with its two affiliated fixed-line Internet operators, the latest in an industry-wide move to converge the fixed-line and wireless businesses. The operator is planning on merging with LG Dacom Corporation, a fixed-line Internet operator, and LG Powercom Corp., an Internet service unit.Significance: The merger is essential for LG to compete with its bigger rivals to secure more customers in the nearly saturated local telecom market. LG Group currently owns 37.4 percent and 30 percent stakes in LG Telecom and LG Dacom respectively. LG Dacom has a 40.9 percent stake in LG Powercom, while Korea Electric Power Corporation holds a 38.8 percent stake in LG Powercom.
    Internet
    •         The number of South Korean subscribers to real-time Internet-protocol television (IPTV) has topped the 1 million mark, helped by the expansion of infrastructure and improved service quality. KT Corp., SK Broadband Co. and LG Dacom Corp. achieved the landmark, about nine months after the commercial service of IPTV started. IPTV delivers television and movie content real-time through broadband Internet networks instead of using radio frequency or satellite signals as traditional TV does, and also offers video-on-demand (VOD) services. Including VOD subscribers, the number of IPTV viewers totaled 2.01 million.
    Networking
    •      Cisco is doing smoothly in investment in Korea. The investment of US$2 billion for 5 years promised by Chairman John Chambers on April will proceed soon. Cisco invested US$40 billion in local venture fund on October 3, and has followed original plan such as appointing head of Global Center, which will be established in Songdo. Recently, it has created separate organization related with Songdo u City business within Cisco Korea. Cisco appointed Jean Louis Maso, worked in India office, as head of GCIU, which will be established in Songdo International Business Complex. Jean is executive of headquarters. He and his family moved to Korea to begin assignment. Global Center is R&D organization, which was stressed by Cisco as the first investment in Songdo. Global Center will develop application applied to u City, cooperate in eco partnership and smart solution, key R&D for Cisco.
     
    China
    Internet
    •         Chinese IM software QQ saw a concurrent online user base of 80 million. China had had an Internet user base of 338 million by the end of June 30, 2009 with about 25 percent Chinese netizens used QQ simultaneously. In addition, the company reached a simultaneous online QQ user base of 50 million, 60 million, and 70 million in February, May, and September, respectively, the company announced in its financial report previously. Total revenue surged 79.9 percent year on year. Net profit was up 84.3 percent. QQ registered accounts 990 million, climbing 5.9 percent. IM active accounts 448 million, rising 9.1 percent. Its market value hit HK$231.8 billion (US$29.9 billion) in September, outracing its peers like Ebay, Yahoo, and becoming the third biggest Internet company by market value in the world.
    •         Alibaba Group's consumer-focused e-commerce site Taobao.com has recorded more than 10,000 daily transactions through its "Wireless Taobao" service. Average daily transactions are expected to reach 13,000 in November. Wireless Taobao was established in March 2009, includes both consumer-to-consumer and business-to-consumer services, and currently has over 200 million products.
    •         Global Sources has appointed Spenser Au as company Deputy Chief Executive Officer, effective immediately, Global Sources announced. Merle A. Hinrichs still holds the position of Global Sources Chairman and CEO. Au has worked at Global Sources for the past 30 years, in positions including President of Asian Sales, Regional Sales Manager and Publisher.
    Internet
    •         ezTravel booked revenue of nearly 4 billion yuan (US$585 million) in the first three quarters of 2009, compared to 5 billion yuan (US$732 million) in the full year 2008. Ctrip.com took nearly 20 percent stake in ezTravel after ezTravel decided to develop global and regional markets in 2006. Ctrip has ordered 250,000 tickets to the Shanghai 2010 Expo and has offered ezTravel 30,000 tickets to resell.
    Mobile/Wireless
    •         China exported a total of 237 million mobile phones in the first half of 2009, with an export value of US$16.1 billion. The nation imported 11.74 million mobile phones in the period, and it saw a mobile phone output of 305 million. BYD Co., Ltd., Samsung, ZTE Corporation, and LG all gained high growths, for instance, Samsung's mobile phone output rocketed 300 percent year on year in its Huizhou production plant, with the highest growth ratio. By contrast, the mobile phone shipments all declined in Foxconn Technology Group, Motorola, Inc., Huawei Technologies Co., Ltd., and Compal Communications Inc. The nation harvested an aggregated mobile phone export volume of 533 million units in the full year 2008, with an export value of US$ 38.5 billion.

    Telecommunications

    •         China’s telecommunication sector has been continuously witnessing considerable developments over the recent years. The telecom industry has experienced double-digit growth over the past decade. And the recent move by the government, aimed at restructuring the domestic telecom industry following the issuance of 3G licenses in early 2009, has brought about a wave of rapid development and deployment of telecom infrastructure throughout the country. Operators continue to invest billions of dollars into the development of world-class telecom infrastructure in the country, despite gloomy economic environment. The issuance of 3G licenses in January 2009 has initiated a wave of investments that has long been waited for.
    •         ZTE Corp.’s controlling shareholder Shenzhen Zhongxingxin Telecommunications Equipment Co. Ltd. had bought 7.65 million of its A shares, accounting for about 0.42 percent of ZTE's total share capital. The controlling shareholder would hold 620 million shares of ZTE after the deal, representing 33.87 percent of the company's total share capital. ZTE has no interest in buying the GSM assets that Nortel Networks Corp. has put up for sale. The company didn't rule out the possibility of any future acquisitions, and it will remain extremely cautious in future acquisitions considering the current market conditions.
    •         China Mobile expects smartphone sales to be growing in double digits in the coming years, and at least two-to-three times faster than other phone sales. Over the next three to five years, 50 percent of customers will migrate to smartphones, Bill Huang, general manager of the company's research institute, said. Currently about 10 percent of China Mobile customers use a smartphone. Huang further expects the average selling price to fall below US$150 from over US$300 in one to two years.
    •         China Telecom Corporation Ltd. CDMA mobile phone sales volume topped 2.5 million in September 2009, rocketing 600 percent from the period last year. If the sales volume grows at the above pace, the telecom carrier will be likely to seek a net increase of 35 million in its CDMA subscribers. China Telecom plans to lure 35 million CDMA users this year and the demand for CDMA terminals will be 50 million, said an executive for the telecom operator. CDMA mobile phone sales volume arrived at 2.508 million or so this September, outnumbering 2.5 million for the first time, showed a research report. The telecom operator had no time to consider CDMA mobile phone sales volume in 2008 due to the nation's telecom industry regrouping. CDMA mobile phone sales volume was unsatisfying last year. However, CDMA sales volume started to rebound in November 2008 and was forecasted to seek a year-on-year growth of over 600 percent in September 2009.
    Media, Entertainment and Gaming
    ·          VODone Telemedia Co., Ltd. is scheduled to acquire 70 percent of Dragon Joyce, a mobile phone game maker. VODone will spend HK$40 million (US$5.2 million) in cash and offer about 100.789 million shares for the deal, with a total cost of 168 million yuan (US$24.6 million). The deal will bring more synergy and opportunities for the two parties, citing the report. Dragon Joyce focuses on the low-cost domestic mobile phone market, and its users are likely to become the consumers who buy lotteries and Shishicai products by mobile phones. So, the acquisition is in line with VODone's business strategy, pointed out the Hong Kong-listed company.
    ·          MyStarU.com, Inc. will complete the acquisition of the minority ownership of its subsidiary, Subaye.com, Inc. and Subaye's various subsidiaries by October 31, 2009. Subaye is also refocusing efforts to increase its member and will seek additional advertising, marketing, acquisition, joint venture and investment opportunities in the next six months. The Company expects an increase in its membership in the next 12 months. Subaye membership will reach 72,000 unique members. The Company has discontinuance of its plans to spin off certain assets of the Company due to specific transactional complexities and income tax considerations.
    ·          Shanghai plans to focus on development of online video and audio industry, and aims to build the city into a center of China's online video and audio resources by 2012. The online culture industry, including video and audio section, in Shanghai grew rapidly in recent years. It achieved a value added close to 15 billion yuan in 2008 with the growth rate pierced 25 percent. The World EXPO 2010 in Shanghai is believed to provide the city with new opportunities to promote the online video and audio industry. Shanghai has 19 enterprises, which are licensed to provide services for IPTV, handset TV, video sharing websites, video web portals and P2P streaming media. By implementing pilot programs, the industry in Shanghai is now made up of mainly state-own enterprises, as well as other non-state-own businesses, providing various services via different networks.
    •      VisionChina Media Inc. has signed an agreement to acquire subway television advertiser Digital Media Group (DMG) for US$160 million in cash and shares, VisionChina announced. The transaction is expected to close in the first quarter of 2010. The deal will give VisionChina access to the Shanghai market and create China's largest mobile television advertising network, the announcement said. The merged entity will operate bus networks in 18 Chinese cities, including Beijing, Guangzhou and Shenzhen; hold exclusive subway networks in eight cities, including Beijing Guangzhou, Shenzhen, Shanghai and Hong Kong's airport express line. Total consideration will be paid in three installments over two years: a first installment of US$100 million, US$40 million in cash and US$60 million in shares at the close of the transaction, and two subsequent installments of US$30 million each on the first and second anniversaries of the deal.
    •         Hurray Holdings said Songzuo Xiang has resigned as CEO and Xiaoqing Guo has resigned as Chief Financial Officer and Vice President for personal reasons, effective immediately. Shanda Executive Vice President Haibin Qu has been appointed Acting CEO, while Shanda Associate President and Financial Director Li Yao will serve as Acting Chief Financial Officer. Shanda agreed to purchase 51 percent stake in Hurray, a music production, artist development and wireless value-added services provider, for roughly US$46.2 million in June.
    Alternative Energy
    •      China plans to limit the increase of polysilicon projects to reduce surplus capacity. It will strictly regulate the establishment of polysilicon projects in areas that are short of energy supply and apply high electricity prices, because most of China's polysilicon production adopts the improved Siemens process, which is both energy and capital consuming. The country will not approve projects that do not meet environmental protection standards. The production capacity of each new project should reach 30 million tons/year, representing a rise in the investment threshold and allowing companies to enjoy advantages such as economies of scale.
    Technology
    •      Perot Systems Corp. will buy BearingPoint Inc.’s consulting practice in China to develop in the country. BearingPoint China Consulting will become part of Perot Systems’ commercial solutions business unit. The Chinese unit of BearingPoint’s revenue climbed 14 percent to US$35 million last year. The Chinese operations accounted for about 1 percent of BearingPoint’s total sales. Executives declined to disclose the terms of the acquisition at the briefing. BearingPoint was spun off from accounting firm KPMG LLP in 2000 and filed a so-called prepackaged bankruptcy plan in February
    Investments/ Ventures
    •      China lent 516.7 billion yuan (US$75.7 billion) in new RMB-denominated loans in September, the People's Bank of China said. In the first nine months of 2009, new loans totaled 8.67 trillion yuan (US$1.3 trillion), almost 5.19 trillion yuan (US$760 billion) more than the year-ago period. China lent 410.4 billion yuan (US$60.1 billion) in new loans in August. The country saw 999.2 billion yuan (US$146.3 billion) in new deposits in September. M2, the broadest measure of money supply covering all cash in circulation and all deposits, rose 29.31 percent year-on-year by the end of September.
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