【正文】 pment Area People’s park Huai Hai Road Xujiahui Pudong Financial Zone Fiber length: Along subway: Along elevated ring road: Along road: 17000m 9000m 8000m of major business buildings accessed: ~200 Fibers along Subway in construction Subway Elevated ring road Road (dig required) Dense Business Area served Metro stations M M M 32 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI SHANGHAI ECONOMICS VERY ATTRACTIVE DUE TO HIGH BUILDING AND BUSINESS DENSITY 2 4 8705133 1 0 6789 5 4 1 4 2 4 6 1 445 3 1 6 0 0 5 0 0 4 0 0 3 0 0 2 0 0 1 0 0010020030040050060070080090010005 year PV(1) (M RMB) CapEX OpEx Revenue 5 year NPV15%: ~310M RMB 5 year IRR: ~70% Shanghai presents most attractive enterprise solutions market SG amp。 technical support response ? Poor response to customers ? Limited bill customization CT approach Significant opportunity for CNC establish position in customer solutions, ease of use, and responsive service Areas highlighted most in customer interviews Source: Customer interviews。 BCG analysis OSS/provisioning Present value of cash flows 8,000 7,000 5,000 1,000 6,000 3,000 4,000 22 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI AGENDA Business Models ? Domestic and international longdistance voice ? Wholesale/carrier ? Enterprise solutions ? Issues going forward 23 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI APPROACH TO ENTERPRISE SOLUTIONS BUSINESS MODEL Objectives Hypothesized Approach Capture strong share among medium/large business by offering enhanced data solutions ? Goal to establish clear position as best service/quality provider in major markets Utilize most cost effective deployment technologies to cover major metro areas Minimize headtohead petition by offering differentiated, datacentric productsattempt to drive data market Develop image as fast, responsive solutions provider ? Enable petitive advantage for business customers through data ? For building managers: make their buildings more attractive to tenants Deployment to target key buildings in major metropolitan areas ? Four cities by year 20xx/01 ? Top 15 cities by 20xx Fiber in most dense urban hirise areas and LMDS to plement and serve less dense areas Initial lead products will be low cost voice over IP and high bandwidth inter access ? Migration to full data solutions as customer base and capabilities grow ? Quality customer service more important short term than full product offering Emphasis on ease of use and fast provisioning versus petitorsexploit CT’s weaknesses Education of customers on use of data products as petitive weapons Marketing partner with key building managers 24 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI ENTERPRISE SOLUTIONS SUMMARY Preliminary Economics Phase I Capital Investment (20xx,20xx): ~ B RMB ? First four cities (assuming fiber): ~650 M RMB ? Additional 11 cities1: ~400 M RMB OpEx expected to be ~ 40% of revenue by 20xx Market share and revenue estimates 20xx ? Off Voice2: ~20% ? Existing data: ~10% ~ B RMB ? Emerging data: ~ 5% 5 year NPV: Roughly B RMB Assumes launch date of 3Q 20xx for data services ? Likely too optimistic Key Issues to be Addressed Right of way for existing ducts and digging Partnership strategy for high bandwidth IGW Rights to LMDS frequency spectrum Are the 15 cities designated for Phase I buildout the right 15 cities for local access? Tradeoff between pure economics by city vs. strategic value of providing endtoend connectivity What is a realistic time frame for launch? Magnitude of anizational and human resource requirements (1) Assuming LMDS capital and revenue 2 times Fuzhou estimate for cities 1115。 BCG analysis 14 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI AGENDA Business Models ? Domestic and international longdistance voice ? Wholesale/carrier ? Enterprise solutions ? Issues going forward 15 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI APPROACH TO WHOLESALE/CARRIER BUSINESS MODEL Objectives Hypothesized Approach Develop wholesale business as traffic generator to improve economics of backbone through higher utilization Bee the wholesale carrier of choice with technologically superior service offerings including high bandwidth international gateway connectivity Consider wholesaling access to CT, Uni, and Jitong depending on petitive implications Superior customer service with clear positioning ? “The clear alternative to CT” Aggressive deployment of backbone infrastructure ? Connecting top 15 cities by end of 20xx and expanding to top 50 cities by 20xx Seek partnerships to establish high bandwidth international gateway connectivityabsolutely essential for differentiating CNC offering Develop interconnection capabilities in all major POPs and mobile basestations in key geographical locations Wholesale access to incumbent providers where feasible, but do not wholesale sources of petitive advantage (., enhanced data services such as IP VPNs) Rollout product offering in staged manner to ensure quality of service ? Inter connectivity ? Mobile interconnect ? Access