【正文】 OACH TO DOMESTIC AND INTERNATIONAL VOICE BUSINESS MODEL Objectives Hypothesized Approach Capture early revenue from launch of prepaid IP calling cards ? “Cash cow” for funding other business model development Pursue prefix and equal access long distance for business customers as soon as possible to begin establishing relationships Manage pricing and product life cycle effectively to maximize total margin and avoid investing in declining products Do not overextend ourselves nor blur our “data” image Fight the regulatory battle to ensure favorable approaches to equal access and interconnect Market calling cards to business customers in the short term for travelling personnel Emphasize quality image/brand to distinguish from CT and Uniposition calling card as first step in being a next generation full services provider Establish mechanisms to link marketing expenditures with revenue and margin growth by product to ensure effective investment Emphasize low cost targeted marketing and loyalty programs ? Do not overextend ? Always emphasize advanced technology and evolution to full services provision 9 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI DOMESTIC AND INTERNATIONAL VOICE SUMMARY Preliminary Economics Phase I CapEx (2021,2021): ~ B RMB ? Fiber/construction: ~ B RMB ? IP/DWDM equipment: ~720 M RMB ? POP/VOIP: ~530 M RMB ? OSS/Network management system: ~100 M RMB OpEx expected to be ~30% of revenue by 2021 Market share and revenue estimates 2021 ? Off DLD: 30% ? Off ILD: 30% ~ $2 B RMB ? IP Intl. termination: 27% 5 year NPV: Essentially breakeven considering off voice alone1 Key Issues to be Addressed Interconnect agreements with local PTA’s。 1 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI CONTENT Key strategic principles Regulatory overview Market overview Competition overview Business models Next steps 2 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 3 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI Economic modeling Choice of business models to pursue and timing Roadmap for pursuing business models and expected financial performance Integrated approach to CNC business plan Major issues Expected output How do the market sizing and share assumptions translate into overall top line revenue for CNC? What capital investments will be necessary to build out metro and long haul fiber works? Predicted cash flow profile by business model and selected scenarios Assessment of market opportunities How will China data market develop? How large is the overall opportunity for a new entrant? Overall market sizing and revenue forecast by product area Regulatory and petitive analysis What type of regulatory environment will evolve in China? Will equal access for voice and data be granted and when? What effect will WTO have? Regulatory mapping and CNC share predictions across scenarios Strategic implications and capabilities assessment METHODOLOGY BEING USED TO DEVELOP BUSINESS MODELS AND OVERALL STRATEGY Current areas of focus 4 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI CNC AT A CRITICAL STRATEGIC CROSSROADS Preliminary Conclusions Remendations/Decisions to be Made Off VOIP predicted to generate to provide breakeven economics for building backbone1 Wholesale revenue provides significant upside potential ? Majority of wholesale revenue relies on access to mobile carriers Enterprise solutions economics very attractive, but substantial plexity and resources involved Highbandwidth international gateway critical to success in both wholesale and enterprise Economic predictions highly sensitive to a set of key assumptions Accelerate vendor selection and backbone construction。 consider supplying fixedline incumbents Cover POPs in all major calling zones。 BCG surveys, analysis amp。 industry interviews。 industry interviews。 BCG analysis 27 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI CUSTOMER NEEDS EXIST THRUGHOUT THE VALUE CHAIN CT’s Offering Yields Significant Gaps Learn Buy Get Use/support Pay Customer value chain Needs 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 amp。 A Allocated backbone IDD Emerging data(3) DLD Data services SONET/switching equipment OSS Allocated backbone(2) (1) Assuming 15% cost of capital (2) Cost of providing F/R and ATM service on backbone allocated over first 4 cities (3) Web hosting IP VPNS, etc. Source: BCG benchmark database。 field analysis Power provisioning, etc.