【正文】 1,276 1,287 1,298 1,309 1,319 As percentage of total population – low case* Millions (total population) China Urban*** * 0205 forecast are subs after inactive and multisimcard reduction ** Peration over total population *** Peration over urban population. 02 PD China Mobile Teles Service Industry 11 CHINA’S RICHER PROVINCES GENERALLY HAVE MORE SUSCRIBERS AND ARE GREATER PENETRATED… 596582987215882977790751188569573 . 03 . 51 3 . 36 . 34 . 46 . 73 . 65 . 84 . 73 . 22 . 82 . 82 . 83 . 12 . 92 5 .02 4 .71 8 .61 4 .21 3 .31 1 .39 .78 .15 .34 .94 .84 .74 .33 .83 .2Population Millions 1 2 .01 4 .27 1 .54 4 .43 3 .15 9 .33 7 .17 1 .68 8 .76 5 .35 8 .35 9 .66 5 .18 1 .69 0 .6Peration Percent, 2022 Subscriber CAGR Percent, 19982022 Number of subscribers Millions Province Guangdong Liaoning Zhejiang Jiangsu Shandong Fujian Heilongjiang Shanghai Hebei Sichuan Beijing Henan Anhui Hubei Hunan Source: China Statistical yearbook, JP Man Report, McKinsey analysis 02 PD China Mobile Teles Service Industry 12 …WHILE THE POOR WESTERN AND INTERIOR PROVINCES HAVE LESS SUBSCRIBERS AND ARE LESS PENETRATED * Growth rate from 1999 2022 Source: China Statistical yearbook, JP Man Report, McKinsey analysis 1 .32 .30 .61 .10 .21 .30 .71 .71 .41 .31 .70 .90 .11 .00 .10 .661967391412787106878084183580*n . a .73Population Millions 9 .62 7 .48 .12 3 .44 .43 0 .21 7 .14 2 .53 5 .03 2 .54 5 .92 6 .73 .44 3 .54 .33 7 .5Peration Percent, 2022 Subscriber CAGR Percent, 19982022 Number of subscribers Millions Province Jilin Guangxi Yunnan Shaanxi Chongqing Shanxi Tianjin Inner Mongolia Jiangxi Gansu Xinjiang Hainan Ningxia Qinghai Tibet Guizhou 02 PD China Mobile Teles Service Industry 13 KEY MESSAGES petitive landscape for mobile services has evolved from a single regulator and operator to today’s duopoly of China Uni and China Mobile, both of whom are unassociated with the Ministry of Information Industries. A second breakup of China Tele is expected to form two large tele operators, China Tele and China Net Group, who are likely to receive mobile licenses. A fifth tele operator, China Rail, also has the potential of receiving a third generation license and building a mobile business. For now, China Mobile dominates the market with 82% value share and 72% subscriber share and owns much of the high value user base. However churn is already high and is expected to increase with continuing pricing pressures and increased petition. 02 PD China Mobile Teles Service Industry 14 CHINA’S MOBILE OPERATOR LANDSCAPE HAS EVOLVED SIGNIFICANTLY, CULMINATING IN SECOND BREAKUP OF CHINA TELECOM No mobile licenses currently Source: Literature search。 covering all major cities (500 cities) ?Be technology leader, thus eager to enter 3G ?Focus on highend customers ?Trialing GPRS with 7 vendors ?Strongly supporting WAP ?Shifting attitudes on technology, now first player to cover both GSM and CDMA ?Focusing attention on developing CDMA works ?Trialing GPRS with 4 vendors ?Compete on service offering with existing operators, leveraging government and supplier expertise ?Active with WLL and local mobility ?Go straight to 3G if possible ?Obtain mobile license as quick as possible regardless of technology standard ?Roll out wireless data services even if it means taking GSM/GPRS first ?May focus initially on GZ, BJ, SH ?Likely intends following 2tier structure – Obtain 3G license to target highend users – Use 2G PHS to target voice subscribers ?Vodafone ?HP ?Hutchison ?KDDI ?SK Tele ?Telstra ?ATamp。 Merrill Lynch。 Asia。s son onboard ?Remains dominant fixedline operator ?Dominant in data munications and in Inter service ?2nd largest fixedline work ? Facing 2G spectrum shortage in major cities 2022/2022 ?Uni has 10% price advantage by regulation ?Management and business structure not yet pletely set up ?Weaker brand and public peration than CMHK ?Facing plexity of dual work management ?Infrastructure spend high to build CDMA work ?Lacks fixedwork reach ?Has no mobile operating license ?Lacks mobile expertise ?Regulatory concerns as MII law prohibiting JVs with SOEs targets relationship with SARFT (one of the founders) ?Has no mobile operating license ?Lacks mobile expertise ?Carries monopoly culture and lacks businessdriven aggressiveness ?Bound to financially nonviable rural area expansion of fixedline work ?Uncertainties in its breakup plan ?Has no mobile operating license ?Lacks mobile expertise ?Lacks scale and support Existing/ potential operator 02 PD China Mobile Teles Service Industry 20 MOST OPERATORS HAVE EXISTING PARTNERSHIPS WITH FOREIGN PLAYERS * China Rail is involved in no relevant partnerships Source: Literature Research。D JV between majority owned subsidiary Aspire and HP ? Hutchison owns % of China Uni (listed) ? Joint development of technology for high speed mobile phone ? KDDI to supply CDMAOne mobile phones ? Strategic Alliance to aid China Uni’s CDMAOne work development and 3G transition ? Strategic alliance to aid Uni develop CDMA work ? ATamp。 Industry interviews。s churn going forward ? Intensifying petition causes both sets of churn rates to rise ? As works bee similar, customers appreciate lower China Uni price Source: Analyst report。 Man Sta