【正文】 ston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIAPPROACH TO DOMESTIC AND INTERNATIONAL VOICE BUSINESS MODELObjectives Hypothesized ApproachCapture early revenue from launch of prepaid IP calling cards? “Cash cow” for funding other business model developmentPursue prefix and equal access long distance for business customers as soon as possible to begin establishing relationshipsManage pricing and product life cycle effectively to maximize total margin and avoid investing in declining productsDo not overextend ourselves nor blur our “data” imageFight the regulatory battle to ensure favorable approaches to equal access and interconnectMarket calling cards to business customers in the short term for travelling personnelEmphasize quality image/brand to distinguish from CT and Uniposition calling card as first step in being a next generation full services providerEstablish mechanisms to link marketing expenditures with revenue and margin growth by product to ensure effective investmentEmphasize low cost targeted marketing and loyalty programs? Do not overextend? Always emphasize advanced technology and evolution to full services provision 10 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIDOMESTIC AND INTERNATIONAL VOICE SUMMARYPreliminary EconomicsPhase I CapEx (2023,2023): ~ B RMB?Fiber/construction: ~ B RMB?IP/DWDM equipment: ~720 M RMB?POP/VOIP: ~530 M RMB?OSS/Network management system: ~100 M RMBOpEx expected to be ~30% of revenue by 2023Market share and revenue estimates 2023?Off DLD: 30%?Off ILD: 30% ~ $2 B RMB?IP Intl. termination: 27%5 year NPV: Essentially breakeven considering off voice alone1Key Issues to be AddressedInterconnect agreements with local PTA’s。 various benchmarks。 foreign benchmarks。 3 times Fuzhou estimate for cities 510(2) Assumes no local voice revenue through 2023 26 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIENTERPRISE SOLUTIONS BUSINESS MODEL MOST COMPLEX WITH HIGH CAPEX AND OPEX REQUIREMENTS... Building metropolitan fiber rings to offer access to medium and large businesses poses significant challenge? Operating expenses required dwarfs long haul work costs on a per city basis? Complexity in obtaining nightofway varies by districts within each city? Designing fiber route and work configuration requires significant experience Converting customers to full CNC service may not be as easy as it seems on surface? Initial risk for panies utilizing new entrant ? Coverage issues for offering service to all business locations? Experienced salesforce with established relationships a must 27 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHI…BUT COMPRISES TREMENDOUS UPSIDE POTENTIALInter AccessLeased LinesILDDLDLocalOtherPortalBroadband ContentWeb Hosting/ CollocationExisting Services Emerging Services9804CAGR124%40%10%7%11% IP VPNBroadband Network Applications71%83%186%98%111%286%0004CAGRMarket size (RMB BN)Market size (RMB BN)7896187Overall 16% Overall 86%332Source: CNC team inputs。 industry interviews。 assumes km radius for LMDS area(2) Assume half of the buildings are prime business buildings for economic modelingSR 35 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIPRELIMINARY FUZHOU ECONOMICS UTILIZING LMDS VERY FAVORABLE5 year PV(1) (M RMB)CapEX OpExRevenue5 year NPV15%: ~20M RMB5 year IRR: ~60%LMDS solutions for medium sized cities will play a critical role in developing enterprise solutionsSG APower, provisioning, etc.IDDEmerging data servicesDLDData servicesBase stationCPE(1) Assuming 15% cost of capitalSource: BCG benchmark database。 assumes km radius for LMDS area(2) Assume half of the buildings are prime business buildings for economic modeling 37 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHIOVERALL ECONOMICS APPEAR MARGINAL FOR SHIJIAZHUANG5 year PV(1)。 BCG analysis。 real estate agency interviews。 BCG analysis 28 China Net The Boston Consulting GroupConfidentialDestroy by Shredding4503405Interim14Dec99TZDgxSHICUSTOMER NEEDS EXIST THRUGHOUT THE VALUE CHAINCT’s Offering Yields Significant GapsLearn Buy Get Use/support PayCustomer value chainNeeds identified? How data services can help their business ? Assistance deploying solutions? Quicker and more convenient application channels? Rapid and reliable provisioning? Faster, reliable repair services? Prompt, customized billing? Lack customer focus? Solutions virtually nonexistent? Mostly oneway product marketing? No customer input for provisioning? CT determines queue without specific timing ? No penalties for missed appointments? Negligent repair service? Slow fulfillment technical support response? Poor response to customers? Limited bill customizationCTapproachSignificant opportunity for CNC establish position in customer solutions, ease of use, and responsive serviceAreas highlighted most in customer interviewsSource: Customer interviews。 industry interviews。 industry interviews。 CNC’s team inputs。 only the most dense areas in short term Focused Deployment ? Leverage existing conduits to lay in major urban areasSuperior service and bandwidth? Target CT’s weakness in service and bandwidth Utilize LMDS in intermediate cities and areas where time to market is critical Wholesale/Carrier Target mobile carriers and ISPs with