【正文】 or customized products ? Bee the only choice for these panies Lobby the government to support more emerce and information industries growth CT CNC Uni Jitong CT is likely to be unable to meet growing demand alone Traditional, narrow view New approaches to growing sales 30 TOTAL GDP VS. GDP/CAPITA IS A PRELIMINARY INDICATOR FOR ATTRACTIVE LOCAL ACCESS MARKETS Example: 15 Initial Cities with POPs on CNC Network 1 , 0 0 0 , 0 0 06 , 0 0 0 , 0 0 01 1 , 0 0 0 , 0 0 01 6 , 0 0 0 , 0 0 02 1 , 0 0 0 , 0 0 02 6 , 0 0 0 , 0 0 03 1 , 0 0 0 , 0 0 03 6 , 0 0 0 , 0 0 00 20 40 60 80 100 120Shanghai Beijing Guangzhou Tianjin Hangzhou Wuhan Nanjing Jinan Shijiazhuang Zhenzhou Changsha Xuzhou Xiamen Fuzhou Shenzhen Examples of additional cities not in initial 15 designated for CNC POPs Hypothetical breakeven curve for building local access Suzhou Wuxi Total GDP (k RMB) GDP/cap (k RMB) 31 VERY DENSE MARKETS SUCH AS SHANGHAI BEST SERVED BY METRO FIBER RINGS M POP/rail station Hong Qiao Development Area People’s park Huai Hai Road Xujiahui Pudong Financial Zone Fiber length: Along subway: Along elevated ring road: Along road: 17000m 9000m 8000m of major business buildings accessed: ~200 Fibers along Subway in construction Subway Elevated ring road Road (dig required) Dense Business Area served Metro stations M M M 32 SHANGHAI ECONOMICS VERY ATTRACTIVE DUE TO HIGH BUILDING AND BUSINESS DENSITY 2 4 8705133 1 0 6789 5 4 1 4 2 4 6 1 445 3 1 6 0 0 5 0 0 4 0 0 3 0 0 2 0 0 1 0 0010020030040050060070080090010005 year PV(1) (M RMB) CapEX OpEx Revenue 5 year NPV@15%: ~310M RMB 5 year IRR: ~70% Shanghai presents most attractive enterprise solutions market SG 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。 industry interviews。 BCG analysis。 real estate agency interviews。 field analysis Power provisioning, etc. Fiber construction Right of way Present value of cash flows 33 MEDIUM SIZED CITIES WITH HIGH GDP/CAPITA SUCH AS FUZHOU BEST SERVED WITH LMDS SOLUTION Fiber length: Along road: LMDS station: 5000M 1 Area served(1): of major business buildings covered: ~40km2 ~40(2) Lake Fiber along road Railway Railway station Road LMDS station Major buildings Area served R S (1) More detailed field analysis required to map buildings and most effective LMDS positioning。 assumes km radius for LMDS area (2) Assume half of the buildings are prime business buildings for economic modeling 34 PRELIMINARY FUZHOU ECONOMICS UTILIZING LMDS VERY FAVORABLE 73163 . 5 4 . 1 3 . 7 3 . 1 1 . 2 2 . 52 2 . 1 1 5 1 05051015202530354045505 year PV(1) (M RMB) CapEX OpEx Revenue 5 year NPV@15%: ~20M RMB 5 year IRR: ~60% LMDS solutions for medium sized cities will play a critical role in developing enterprise solutions SG amp。 A Power, provisioning, etc. IDD Emerging data services DLD Data services Base station CPE (1) Assuming 15% cost of capital Source: BCG benchmark database。 industry interviews。 BCG analysis。 real estate agency provided data Bldg equipment Spectrum fees Fiber to POP Present value of cash flows 35 OTHER CITIES OF SIZEABLE POPULATION BUT RELATIVELY LOW GDP/CAPITA MAY NOT WARRANT INVESTMENT Example: Shijiazhuang No fiber connection required, assume rail station is LMDS base 1 Area served(1): of major business buildings covered: ~40km2 ~20(2) Railway Road LMDS station Major buildings Area served S (1) More detailed field analysis required to map buildings and most effective LMDS positioning。 assumes km radius for LMDS area (2) Assume half of the buildings are prime business buildings for economic modeling 36 OVERALL ECONOMICS APPEAR MARGINAL FOR SHIJIAZHUANG 49 . 7 4 . 1 2 . 9 2 . 51 . 8 1 . 91 . 10 . 6 0 . 6 2 0 1 5 1 050510155 year PV(1) (M RMB) CapEX OpEx Revenue 5 year NPV@15%: ~ 3M RMB 5 year IRR: ~5% Cities without dense business districts may not be attractive enterprise markets regard less of overall size SGamp。A Power, provisioning, etc. IDD Emerging data services DLD Data services Base station (1) Assuming 15% cost of capital Source: BCG benchmark database。 industry interviews。 BCG analysis。 real estate agency provided data Spectrum CPE Bldg. equipment Present value of cash flows 37 OVERALL REVENUE AND MARKET SHARE EXPECTATIONS: ENTERPRISE SOLUTIONS Predominately voice (DLD / ILD) revenue in the first two years。 migrating to data and Inter services by 2021 05101520252021 2021 2021 2021 2021CNC revenue (RMB BN) Inter Access Leased Lines ILD DLD Share assumptions Other Emerging Services Web Hosting / Collocation Source: CNC team inputs。 foreign benchmarks。 BCG analysis 1999 3% 80% 1% 3% 80% 1% 0% 0% 0% 0% 0% 0% DLD Off share of total DLD Geographic coverage of CNC CNC share within coverage ILD Off share of total ILD Geographic coverage of CNC CNC share within coverage Leased Lines Geographic coverage of CNC CNC share within coverage Inter Access Broadband Narrowband / DialUp Web Hosting / C