A week in tech, May 26 - June 2

China
Internet
• Tencent Holdings, a provider of Internet and mobile value-added services, announced a 157-percent surge in its net profit over the same period last year to Rmb249.7 million ($31.1 million). The company attributed its good first-quarter results to the continuing demand for its online games service. The company said its revenue from internet-based value-added services, including online games and online community services, registered a 193-percent growth with the newly launched multiplayer online game, QQ Fantasy, being one of the strong drivers. Tencent said it plans to introduce an expansion pack for QQ Fantasy in a bid to boost usage. It announced, too, the launching of a new game, R2Beat. The company said the peak concurrent game users recorded during the period reached 2.8 million. With 220 million users in the first quarter, which represents a 9.2-percent rise on the previous quarter, Tencent is China’s largest instant messaging service provider.
• KongZhong announced the setting up of a separate wireless value added service partnerships with Chinese e-commerce website DangDang.com and real estate information provider SouFun.com. Under the agreement, the two internet companies are entering an alliance with KongZhong in wireless value added services (WVAS) and establish co-branded channels on KongZhong's wireless Internet portal, Kong.net, to provide wireless users with content and services. DangDang is one of the largest China-based e-commerce websites specializing in books and consumer electronics in China. KongZhong's partnership with DangDang in the co-branded business to customer (B2C) online shopping channel on Kong.net WAP platform is exclusive. The partnership with SouFun in the co-branded real estate information channel on Kong.net WAP platform is exclusive except for limitations specified.

Mobile/Wireless
• China exported 228 million mobile phones in 2005, of which only 5.8 percent, or 13.2 million phones, were Chinese home brands, according to government sources. The figure means that less than six out of every 100 mobiles phones that China exported last year were home brands, with the market share of foreign-brand mobile phones posting a 60-percent increase in 2005 while that of home brand phones declined to 40 percent last year from 44.5 percent a year earlier.
• Nokia announced that it has secured a GSM network expansion deal with Sichuan Unicom, a subsidiary of China Unicom, marking its entry into the GSM market in Sichuan and Western China. Under the agreement, Nokia said it will deploy its GSM radio and core networks, including the Nokia MSC Server mobile softswitch, in four cities in the Sichuan Province. Nokia said it will also provide a range of services, including network planning, optimization, and rollout services.
• China Unicom announced the increase of subscribers to its global system for mobile (GSM) service to 98.7 million at the end of April, from 97.9 million at the end of March. The company said its postpaid GSM users increased by 2 million in the first four months of the year, with the number of prepaid increasing to 1.6 million. China Unicom revealed that its CDMA subscribers registered 33.9 million, compared with 33.6 million at the end of the previous month, while its postpaid CDMA subscribers climbed to 1.1 million for the first four months this year, with prepaid users rising to 65,000.
• After reportedly beating other competitors, China Mobile, the world’s biggest mobile operator by subscribers, is said to be ready to acquire Millicom International, an emerging markets mobile operator, in a deal valued at $5.6 billion. Two of the companies identified in the bidding to take over Millicom were MTC of Kuwait and Telenor of Norway. China Mobile’s adviser for the deal was Morgan Stanley. China Mobile made an earlier attempt to acquire a stake in Pakistan Telecommunications, which was also advised by Morgan Stanley. With mobile operators looking for expansion in emerging markets, Millicom, with its 9 million customers, is seen as providing a relatively untapped region. The company is present in 16 emerging market countries in Asia, Latin America and Africa, and in the Congo, Sri Lanka and Guatemala. In these areas, Millicom operates in a population of some 390 million, with a small percentage owning mobile phones.
• Posting a 10.9-percent increase quarter on quarter, China's mobile value-added services (MVAS) market was valued at Rmb6.2 billion ($772.5 million) in the first quarter of 2006, according to Analysys. The report marked a 5.4-percent growth rate for the CRBT (colour ring back tone) service, a sharp decline from 27.1 percent in the fourth quarter of 2005, which shows saturation in the CRBT market. Analysys said IVR (Integrated Voice Response) services, also known as audiotext, posted an 8 percent quarter-on-quarter rise. The market size for MMS (Multimedia Message Service) was valued at some Rmb229 million ($28.5 million), which represents a 10-percent increase over the previous quarter. Forming the biggest portion of MVAS was the SMS (Short Message Service) services, whose value went up by 5.4 percent to Rmb1.7 billion ($211.8 million) in the first quarter this year, compared to the fourth quarter of 2005.

Media, Entertainment and Gaming
• Shanda Interactive Entertainment announced that it will bring Walt Disney's characters to its game platform to tap into China's online game market, which is predicted to jump fourfold in the next five years. Both parties were quoted as saying that the cooperation will help the second biggest US media firm enter the rapidly growing game market in China for the first time. Observers are saying that Shanda can strengthen its online casual game business through the deal as its revenue in MMROPG has declined. Shanda said puzzles, chess, and card games with Disney's characters will be available in China in the spring of 2007. IDC said the revenue in the Chinese online game market, which has a growing segment of female gamers, reached $68.7 million last year and it is expected to hit $210 million in 2010. Aside from the partnership with Shanda, Disney revealed it is also in talks with the Shanghai government to build a theme park in the city after the US-based firm opened one in Hong Kong last year. Shanda said it plans to expand its core business to home entertainment services and casual games after the online MMORPG business dropped, as it faces challenges from NetEase.com and the9.com.

Software
• In terms of market size, China’s software industry registered a massive 700-percent increase to Rmb390 billion ($48.5 billion) in 2005, compared to Rmb59.3 billion ($7.3 billion) in the year 2000, according to figures disclosed at the 28th World Software Engineering Conference. The report noted that with the rapid development of the country’s software industry was the increase in its market share on the international arena. The report said software export and software outsourcing went up to $3.5 billion last year, compared to the country’s software industry exports that totaled only $400 million in 2000. With this performance, the sales value from China’s software industry increased 3.5-percent to surpass India and South Korea.

Hardware
• TCL Corp revealed that it has begun marketing low-priced laptop computers, with the laptop going as low as Rmb5,000 ($623). The company said that the move is a bid to bring in profits even as it stated that it has made investments in R&D, which led to more than 200 new technologies expected to boost the company’s chances of returning to profit this year. TCL said it has spent some Rmb2.1 billion ($261.6 million) to develop new products and it promises to shell out almost the same amount this year. TCL Corp is reputed to be the world's largest maker of televisions.
• Lenovo Group announced a 359-percent year-on-year rise in its revenue to HK$203.6 billion ($26.2 billion) for the fiscal year ended March 21. The company, however, said that given the utilisation of funds for the acquisition of IBM’s personal computing division, the profit attributable to shareholders stood at $22.3 million, a figure that is 85-percent lower than the previous year.

Semiconductor
• Galaxy Semi-conductor Holdings, a Chinese maker of diodes, announced its plans to launch an IPO in Hong Kong with the aim of generating up to HK$90 million ($11.6 million) for business expansion. The company is one of the mainland's largest makers of diodes used in consumer electronics, information technology and lighting products. The company reported a net profit of HK$440 million ($56.7 million) in 2005, with turnover at HK$250 million ($32.2 million). China Capital is the sponsor of the listing.
• TC Interconnect Holdings, a maker of printed circuit boards, announced its plan to have a Hong Kong listing. The company posted revenue of about HK$500 million ($64.4 million) in 2005, with 14 percent of the revenue attributed to sales of multilayer PCB products, with the company announcing that it aims to expand sales of the products. TC Interconnect said it has also plans to build another plant in 2007. CAF Securities is the sponsor of the deal. According to Custer Consulting Group's estimate, the global market for electronic products will be $1.6 trillion in 2008.

Telecommunications
• China Telecom Corp announced that it would indeed spin off its network and engineering services unit into a new company called China Communications Services, with the plan to have it publicly listed in Hong Kong. Through the IPO, the company is aiming to raise between $200 million and $400 million in the second half. China Communication Services will include the telecommunications network design and engineering businesses in six provinces and cities – Shanghai, Guangdong, Fujian, Hainan, Hubei and Zhejiang – which have a total asset value of Rmb23 billion ($2.8 billion). In a separate development, China Telecom said it has formed a wireless service department for mobile services, with the mainland trials to use the TD-SCDMA standard at 100 cell sites by the end of this month. Goldman Sachs and China International Capital Corp sponsor the IPO.

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