Asian Tech Stock Weekly Review (Sept 26 - Oct 2, 2011)

by: IRG Ltd



  • NTT DoCoMo Inc. (DCM) does not expect its investment in India's Tata Teleservices Ltd. to become profitable for several years despite rapid growth in the subcontinent's highly competitive telecommunications market, a senior executive at Japan's largest mobile operator by subscribers said. The tough environment in India, where the industry regulatory framework remains in flux after recent corruption scandals, also means there's no way all 15 (mobile) carriers can survive in the end, NTT DoCoMo Senior Executive Vice President Masatoshi Suzuki told Dow Jones Newswires.
  • Jupiter Telecommunications (NYSE:JNPR) has agreed to purchase a controlling stake in Yokohama Cable Vision from Sotetsu Holdings (OTC:SGRYF). Yokohama Cable Vision (YCV) operates in Yokohama with 260,000 homes passed. J:Com will acquire 51 percent of the shares in YCV and Tokyu will acquire 49 percent. J:Com and Tokyu will cooperate in running YCV to offer a number of different services.
  • Japan ended June with 38.55 million ISDN subscribers, down by 9 percent year-on-year. The total number of ISDN contracts held by NTT East and West stands at 33.65 million, showing an ongoing trend of decline, according to the Ministry of Internal Affairs and Communications. The number of IP phones in use rose 11.2 percent to 26.42 million with the number of 0AB~J-IP phones growing by 21.2 percent over the same period last year. Furthermore, the number of mobile and PHS subscribers rose 6.5 percent year-on-year to 125.24 million.


  • Sharp Corp. (OTCPK:SHCAY) will turn its joint venture with Culture Convenience Club Co., the operator of the Tsutaya music and book store chain, into a wholly owned unit as of Sept. 30. The decision to dissolve the alliance comes after Sharp said earlier this month that it will scale back sales of the Galapagos tablet by discontinuing two of three models less than a year after their December debut.
  • Sony Corp. (NYSE:SNE) expects a significant impact on earnings from the weaker euro, underscoring the company’s vulnerability to the European debt crisis. Sony doesn’t acquire many components from Europe as its Asian suppliers settle in dollars, limiting its ability to hedge against the euro’s decline, Hiroshi Kurihara, corporate treasurer at Sony, said in an interview in Tokyo. The euro’s slump to a decade low against the yen compounds the challenge for Chief Executive Officer Howard Stringer, eroding the value of sales in Sony’s biggest export market just as a weakening won helps South Korean competitor Samsung Electronics Co. (OTC:SSNLF). Stringer has shut factories and focused on new products such as tablet computers in a bid to end losses. Europe is the biggest market for some Japanese companies including Nintendo Co. (OTCPK:NTDOY) and Canon Inc. (NYSE:CAJ). Nintendo got 41 percent of revenue in the quarter ended June 30 from Europe, data on the Bloomberg show. Canon generated 32 percent of sales in the region last fiscal year.



  • SK Telecom Co. will offer seven smartphone models and one tablet device running on ultra high-speed network technology this year. The mobile carrier will launch this month Samsung Electronics' hot-selling Galaxy S phone that will run on a faster network technology called long-term evolution (LTE). The fourth-generation technology promises faster download speeds than the current third-generation platform, allowing consumers faster access to applications such as television programs, movies and video conferencing. It will release LTE-compatible smartphones developed by South Korea's LG Electronics and Taiwan's HTC Corp. and one tablet device made by Samsung. SK Telecom also said it targets 5 million LTE subscribers by 2012, up from 500,000 users by the end of this year.


  • Samsung Electronics Co. can still meet its target for tablet-computer sales this year even as Apple (NASDAQ:AAPL) seeks to block them in some markets. The company is on track to raise sales of tablet computers by at least five times this year from 2010 as it planned, J.K. Shin, head of Samsung’s mobile-phone division. Samsung and Apple have been involved in multiple lawsuits around the globe, since Apple claimed in an April lawsuit filed in the U.S. that the South Korean company’s Galaxy devices copied the iPhone and iPad. Apple has blocked sales of the Galaxy Tab 10.1 in Germany, which Strategy Analytics forecasts will be Europe’s third-largest market for touch-screen mobile computers this year. In Australia, Samsung will push back introduction of the product until the end of this month because of a hearing being held this week. Federal Court Justice Annabelle Bennett may grant a brief injunction on sales of the Samsung tablet as she considers arguments from South Korean company and Apple.



  • Renren (NYSE:RENN) has entered into a definitive agreement to acquire 100 percent of, a user generated content (UGC) online video sharing site in China. The consideration for this acquisition will be US$80 million in cash. The acquisition is expected to be completed in the fourth quarter, subject to customary closing conditions. Founded in 2005, is an online video-sharing site where users can upload, view and share videos. A majority of the videos offered on the site is created by users, consisting of content mix from performing artists, amateur groups, and video enthusiasts.
  • ChinaCast Education Corp hinted that is may not follow up on its planned US$50 million share buyback program. The company which offers post-secondary education and e-learning courses said it will engage an independent firm this week with forensic accounting and banking due diligence expertise to conduct an independent review of its cash balances. Chinese regulatory authorities have also expressed "serious concerns over our intention of taking the full US$50 million out of China" and the impact of this on the quality of education the company can provide, the CEO said in the letter posted on the company's website.
  • Founder and CEO of Chinese e-commerce giant Alibaba (OTC:ALBIY) said he is keen on buying Yahoo Inc. (YHOO) if the opportunity presents itself and has held discussions with other potential buyers about options. Jack Ma also said he planned to spend the next year in the U.S. learning more about the country and the market. An Alibaba spokeswoman said Ma would be based in the San Francisco Bay area, but would travel across the country and would continue his operational duties as chairman and CEO of the Alibaba Group.
  • HiChina Group Ltd, a full-service Internet infrastructure service provider controlled by Chinese e-commerce portal Ltd. could be valued at around US$500 million, ahead of a separate listing in the U.S. Ltd, which in 2009 acquired an 85 percent stake in HiChina Group for US$79 million has a proposal to the Hong Kong Stock Exchange related to a proposed spin-off of HiChina Group. The proposed offering is currently under review by the relevant securities regulatory authority, it said, adding that details of the offering--including size and price--have not been finalized. HiChina is a full-service Internet infrastructure services provider that offers domain name, hosting and cloud-based services as well as website building for small- and medium-sized enterprises in China, it said.
  • Chinese Internet companies could have a tougher time listing on U.S. stock exchanges because of an expected Beijing clampdown on a favored corporate structure. It is unlikely to halt all new U.S. listings of Web companies that want to follow in the footsteps of heavyweights such as Baidu (NASDAQ:BIDU) and Renren but it could prevent some and slow the progress of others. Earlier this week, Reuters reported legal sources saying the China Securities Regulatory Commission has authored a request to the Chinese government's equivalent of a cabinet, the State Council, asking it to take action against the structure, known as a Variable Interest Entity, or VIE. Web companies and others from sectors deemed important to China's interests use the VIE structure, which usually involves an entity in the Cayman Islands or another offshore haven, to get around Chinese restrictions on direct foreign investments in strategic sectors. VIEs operate in a legal gray area - the structure means that the shares foreign investors get to own in Chinese companies listed in the U.S. are really shares in a revenue stream rather than direct equity stakes in the operating company. Because VIEs are agreements between the Chinese operating company and its listed counterpart to funnel the revenues to investors, they expose the foreign investor to risk should the agreement fall apart. Chinese authorities have tightened rules and threatened further crackdowns several times in recent years.
  • China's annual retail trade value via the internet is expected to hit 3 trillion yuan (US$469.94 billion) by 2015, which would account for more than 9 percent of the country's total social retail sales then, according to a draft of the country's 2011-2015 plan for e-commerce industry. China's Ministry of Commerce released the daft last week, which also proposed to basically form a standard law system for the e-commerce industry. Statistics show that China's e-commerce transaction value was nearly 3 trillion yuan a year now, with trade value via the internet at 350 billion yuan (US$54.7 billion), accounting for 4.7 percent of the country's total social retail sales value.


  • China will invest around 1 trillion yuan (US$156.54 billion) in the third and fourth generations of mobile telecommunications (3G and 4G) during the 12th Five-Year Plan (2011-2015). China will build 500,000 3G stations in the coming five years, adding to the current 700,000. Purchasing equipment and building infrastructure will cost an estimated 500 billion yuan (US$78.1 billion). At the same time, it will also push forward the development of 4G by conducting large-scale experiments on its own 4G technology TD-LTE and putting it into commercial use if feasible. The estimated investment is around 500 billion yuan (US$78.1 billion). Regarding 4G, a TD-LTE network might be built as early as 2013 by China Mobile (CHMO.PK), in conjunction with Datang Telecom, one of China's major telecom equipment producers.


  • Huawei Technologies Co., the Chinese maker of telecommunication equipment, launched in India its business unit that sells networking products to non-telecom customers. Huawei's move in India comes as its traditional clients, telecom service providers, are slowing expansion following allegations of corruption in the sector and a decline in monthly additions to the number of telephone users. The company expects the newly launched enterprise unit to post about US$1 billion of annual revenue in India by 2015, accounting for a quarter of its total revenue from the country at that time, Eric Yu, president of the division at Huawei Telecommunications India Pvt. Ltd., told Dow Jones Newswires. Huawei had about US$1.50 billion revenue from India in 2010. Enterprise business accounted for 8 percent of Huawei's US$28 billion global revenue in 2010. It is aiming for the unit to record US$15 billion by 2015. The market for enterprise network solutions in India is expected to be worth about US$11.5 billion a year, Eric said. Huawei will tie up with system integration companies like Wipro Ltd. and AGC Networks Ltd. to sell network-based products to clients in the government, power, transport, banking and Internet sectors.
  • China ended August with 1.23 billion telephony subscribers with the number of mobile users rising to 940.09 million and the number of landline users falling to 288.8 million, CapitalVue reports citing figures from the Ministry of Industry and Information Technology. Of the total landline users, the number of wireless local telephone subscribers declined to 20.96 million, accounting for 7.3 percent of all fixed-line subscribers. Meanwhile, the number of broadband users rose to 146.62 million in August.
  • China Mobile is under pressure from investors to spend some of its horde on international acquisitions, including possibly Telefonica (NYSE:TEF), Bloomberg reported. China Mobile has an estimated US$50 billion in free cash. Chairman Wang Jianzhou said that the company does remain open to overseas investment, he believes the cash is better spent on upgrading the operator's networks and paving the way for TD-LTE rollouts.


  • The world's No.3 PC brand Lenovo Group (OTCPK:LNVGY) has entered into a US$300 million venture with the world's No.2 contract PC maker Compal Electronics in eastern China. Lenovo will own 51 percent of joint venture Lienpal (Hefei) Ltd, with Compal holding the remainder. Both companies will invest US$100 million initially followed by an additional US$200 million over the subsequent 18 months, depending on business climate and capacity expansion.
  • China's electronics and information industry, covering only projects involving investment exceeding 5 million yuan each, completed total of 560.2 billion yuan (US$87.61 billion) of fixed asset investment (FAI) in the first eight months of 2011, representing an increase of 67.7 percent year on year. The growth rate was 41.1 percentage points higher than the industrial investment. In August, the electronics and information industry completed investment of 79.55 billion yuan (US$12.4 billion), an increase of 70.8 percent year on year. The growth rate was 5.6 percent points higher than the previous month. Investment in electronic components, electronic devices and information mechanical and electrical sectors grew 61.8 percent year on year, 54.5 percent year on year and 122.1 percent year on year with 97.2 billion yuan (US$15.2 billion), 141 billion yuan (US$22 billion), and 127.7 billion yuan (US$19.9 billion), respectively.


  • Business revenues of China's software industry totaled 1,112 billion yuan (US$174.05 billion) in the first eight months of 2011, up 30.5 percent year on year, statistics released by the Ministry of Industry and Information Technology (MIIT) show. The year-on-year growth is 0.7 percentage points higher than that for the same period of 2010.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.