【正文】 cused 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 mobile carriers and ISPs with backbone transport。 BCG analysis Voice revenue Share assumptions 012341999 2021 2021 2021 2021 2021CNC 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 2021 10% 60% 25% 11% 60% 25% 11% 60% 20% 2021 17% 75% 29% 18% 75% 29% 18% 75% 25% 2021 23% 90% 33% 26% 90% 33% 24% 90% 30% 2021 30% 100% 30% 33% 100% 30% 30% 100% 30% 2021 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 00100020213000400050005 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。 foreign benchmarks。 real estate agency interviews。 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。 BCG analysis 14 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 15 China Net The Boston Consulting Group ConfidentialDestroy by Shredding 4503405Interim14Dec99TZDgxSHI APPROACH TO WHOLESALE/CARRIER BUSINESS MODEL Objectives Hypothesized Approach Develop wholesale business as traffic generator to improve economics of backbone through higher utilization Bee the wholesale carrier of choice with technologically superior service offerings including high bandwidth international gateway connectivity Consider wholesaling access to CT, Uni, and Jitong depending on petitive implications Superior customer service with clear positioning ? “The clear alternative to CT” Aggressive deployment of backbone infrastructure ? Connecting top 15 cities by end of 2021 and expanding to top 50 cities by 2021 Seek partnerships to establish high bandwidth international gateway connectivityabsolutely essential for differentiating CNC offering Develop interconnection capabilities in all major POPs and mobile basestations in key geographical locations 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 (2021,2021): ~100 M RMB ? ISP access platform: ~50 M RMB ? OSS/Provisioning systems: ~50 M RMB OpEx expected to be ~ 10% of revenue by 20211 Market share and revenue estimates 2021 ? 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 2021 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