【正文】 s 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 ports to backbone 16 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI WHOLESALE/CARRIER SUMMARY Preliminary Economics Phase I CapEx (20xx,20xx): ~100 M RMB ? ISP access platform: ~50 M RMB ? OSS/Provisioning systems: ~50 M RMB OpEx expected to be ~ 10% of revenue by 20xx1 Market share and revenue estimates 20xx ? Mobile (backbone): 15% ? ISPs: 9% ~ B RMB ? Access ports: 100%2 ? Dark fiber: 100%2 5 year NPV: ~ $ B RMB Assumes launch date of 3Q 20xx for leased lines and relatively aggressive mobile shares ? Potentially too optimistic Key Issues to be Addressed Backbone technology platform QOS for voice vs. lower cost deployment? Highbandwidth international gateway paramount to differentiating ISP access Favorable regulatory backing for courting regional CT mobile carriers Ensuring existing VOIP gateways can serve wholesale needs Revenue opportunity of wholesaling dark fiber vs. enabling petition Organizational challenges (1) Including allocation of backbone OpEx (2) Market estimates based on revenue generation by CNC alone 17 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI POTENTIAL WHOLESALE CUSTOMERS INCLUDE ISPs, MOBILE OPERATORS, AND FIXED LINE CARRIERS ISPs offer significant potential if CNC can provide superior bandwidth access and to international gateway ? Current satisfaction among regional ISPs very low ? International gateway license in conjunction with high bandwidth transoceanic carrier alliance could provide vastly superior service Mobile carriers will be searching for lower cost alternatives to carry long distance traffic due to intensifying petition ? CNC’s new high capacity VoIP work and international gateway likely to yield lower costs Fixed line carriers potentially looking for alternatives ? Existing longhaul transport infrastructure limited ? China Tele could even be a possible customer given current focus on increasing residential teledensity 18 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI OVERALL WHOLESALE MARKET SIZE IS SUBSTANTIAL AND GROWING AT A MODEST RATE Anticipated Price Decrease in Leased Lines Limits Overall Revenue Growth 0510152025301998 1999 20xx 20xx 20xx 20xx 20xx Leased Lines ISP Market Size (RMB B) 15 Total Leased Lines Mobile 99’ 04’ CAGR Access Ports Leased Lines Paging 18 18 20 22 26 28 4% 41% 1% 152% (1) 9% (1) 01’ 04’ CAGR Source: CNC team inputs。 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。 foreign benchmarks。 BCG analysis Voice revenue Share assumptions 012341999 20xx 20xx 20xx 20xx 20xxCNC Revenue (RMB BN) OffNet DLD % of total CNC revenue 100% 76% 37% 30% 23% 16% OffNet ILD International Termination 1999 3% 80% 1% 3% 80% 1% 5% 80% 0% OffNet DLD Off share of total DLD Geographic coverage of CNC CNC share within coverage OffNet ILD Off share of total ILD Geographic coverage of CNC CNC share within coverage International Termination IP share of total Geographic coverage of CNC CNC share within coverage 20xx 10% 60% 25% 11% 60% 25% 11% 60% 20% 20xx 17% 75% 29% 18% 75% 29% 18% 75% 25% 20xx 23% 90% 33% 26% 90% 33% 24% 90% 30% 20xx 30% 100% 30% 33% 100% 30% 30% 100% 30% 20xx 32% 100% 28% 35% 100% 28% 35% 100% 31% 13 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI PRELIMINARY ECONOMICS FOR LONG DISTANCE VOICE MODEL (PHASE I BUILDOUT) VOIP Revenue Alone Justifies Building Backbone 2 3 0 0 1 4 0 03700 7 0 0740 5 0 0570 1 0 0 4 9 0 5 0 0 0 4 0 0 0 3 0 0 0 2 0 0 0 1 0 0 00100020xx3000400050005 year PV(1) (M RMB) CapEX OpEx Revenue 5 year NPV15%: ~ 500M RMB 5 year IRR: ~12% Essentially breakeven economics for operating backbone for VOIP only VOIP(2) Backbone construction Backbone International termination IDD DLD IP POP/Access platform OSS Present value of cash flows (1) Assuming 15% cost of capital (2) Including settlement charges estimated at 10% of VOIP revenue, and marketing/sales at 10% of revenue (3) Backbone OpEx charges allocated 1/3 each to VOIP, wholesale, and enterprise business model economics Source: BCG benchmark database。 only the most dense areas in short term Focused Deployment ? Leverage existing conduits to lay in major urban areas Superior 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 m