【正文】 1 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHICHINA NETCOM BUSINESS PLAN UPDATEDecember 14, 1999 Beijing 2 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHITODAY’S OBJECTIVES Review the overall analysis of regulation, petition, and market development? Discuss the specific implications for CNC strategy Review the specific draft business models for CNC ? How we might attack the business, carrier, and IDD/DLD markets? What key tradeoffs we need to make? What are the key success factors and assumptions? Discuss the initial economics of these business models, and of CNC overall Discuss the specific next steps in two key areas:? How to finalize and endorse the overall CNC business model? How to move forward with the refined financials, anization design, and the plan for implementation 3 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHICONTENT Key strategic principles Regulatory overview Market overview Competition overview Business models Next steps 4 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIKEY CNC STRATEGIC PRINCIPLES The objective of these principles is to provide further clarity in the development and evaluation of the CNC business model These will be revisited and refined as the project progresses? Our development of business models will seek to be aligned with the principles Strategic principles and key assumptions will be considered in the following aspects CNC shareholders Backbone business Local access business International gateway business Regulatory strategy Competitive strategy Marketing strategy 5 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHICNC SHAREHOLDERS Principles:? Leverage shareholders’ concerted vision in creating a new generation IP broadband munication infrastructure and a profitable, successful pany? Leverage shareholders’ existing backbone assets, local access assets, research capabilities and local government relationships to secure timetomarket and create petitive advantage? Set a model of a new type of “SOE”, as efficient as the best of the FIE/private panies。 beat shareholders’ expectations by delivering high return Assumptions:? CAS: strong interest in seeing CNC successful and profitable quickly, stands ready for favorable regulatory influence and research support。 wants opportunities for working RD? MOR and SARFT: extensive backbone and access assets and ROW main focus on using MOR for right of way, helping them participate in tele will not use SARFT local CATV in the near term, but they are a key user of the backbone Leverage CATV’s city backbone MOR will continue to favor CNC over Uni, provided CNC meets the expectation as a profit center for MOR? Shanghai Municipal Gov39。t: Eager to make Shanghai as China’s test ground for building hightech infrastructure (. the integration of tele, CATV, Inter) in particular, testing HFC to deliver broadband inter one issue: SPT and ATT JV。 how to handle? 6 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIBACKBONE BUSINESS Principles:? Target advanced backbone among 15 key cities in Eastern China。 start with 2 cores from shareholders but quickly build own work? Use backbone for a variety of wholesale and retail voice and data services? Maintain the leading edge IP/packet work, both for technological superiority and to fulfill shareholder mission? Maintain the best cost position, using ROWs, purchasing clout, right technology? Build reserve capacity/conduit to deter others Assumptions:? The costs of construction and ROW will be the majority of new work costs virtually all of the work will use MOR or SARFT right of way? Network will be IP or packet in nature? Deployment plan will keep costs low, build out quickly, and create good position lay large number of conduits in one time later fill, light up, and color fiber strands lease out conduit/fiber/bandwidth to maximize return (utilization) 7 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHILOCAL ACCESS BUSINESS Principles:? Be very focused in local deployment, targeting priority business areas only? Emphasize broadband to the customer, using FTTB and LMDS where logical? Seek strong local market share, especially in new data services growth areas? Differentiate from China Tele by superior services, quality, responsiveness Build strong local team to enable fast service response Emphasize “end to end” work ownership and management Assumptions:? SH, BJ, GZ, and SZ business districts as targets for the near term These account for the vast majority of business tele demand Need to set specific estimates for timing and sequence of deployment? Assume that CNC will have access to key city ROW, such as subway systems? Will need specific assumptions about the ease and cost of hooking up buildings? Assume that primary emphasis will be on FTTB, but that LMDS can play an important role, especially in initial deployment and in secondary cities? Will need specific assumptions about timing of adding secondary cities 8 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIINTERNATIONAL GATEWAY BUSINESS Principles:? CNC will be one of few players with a full international license? Vital to enable CNC to provide endtoend services, global data services, and higher margin IDD service? HK gateway link may be strategically important Assumptio