【正文】 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。 industry interviews。 BCG surveys, analysis amp。 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。 benchmarking 010203040500 1 2 3 4 5 6 7Year after entry Optus (DLD) Tele 2 (DLD) Mercury (DLD) Hong Kong (IDD) Japan (IDD) US (IDD) 0204060801001998 2021 2021(RMB BN) DLD OnNet DLD OffNet ILD OnNet ILD OffNet (%) 11 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI CAREFUL MANAGEMENT OF PREPAID CALLING CARD BUSINESS NECESSARY TO ALIGN WITH LONG TERM STRATEGY Prepaid calling cards call for different capability set and target customers than longer term business models ? Focus on consumers will not plement long term vision of providing enterprise solutions ? Mass advertising and marketing around a lowcost position may not fit image required for future needs Three factors important to consider in managing prepaid calling card business ? Attempt to position cards in marketing messages as the first product from a pany that is building the most advanced work in PRC ? Consider selling cards to businesses for their traveling personnel to begin establishing enterprise relationships ? Carefully manage product life cycle to begin pulling back marketing investment as wholesale and enterprise business models grow 12 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI CNC VOIP REVENUE AND MARKET SHARE EXPECTATIONS Source: CNC’s team inputs。 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 2021/01 ? Top 15 cities by 2021 Fiber in most dense urban hirise areas and LMDS to plement and se