【正文】 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。 Analyst reports China Mobile China Uni China Tele China Net Partner Type of partnership ? Vodafone ? HP ? Hutchison Tele ? KDDI ? SK Tele ? Telstra ? ATamp。T ? Japan Tele ? British Tele ? News Corporation, Goldman Sachs, etc. ? SingTel ? Equant ? Vodafone owns 2% equity share in China Mobile (HK) ? Strategic alliance agreement with Vodafone to be CMHK’s long term preferred partner in areas including Ramp。D technical expertise, standard and protocol development etc. ? Wireless data Ramp。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。T owns 25% of Shanghai Symphony Telemunications ? MOU in fixed line, mobile phone and fastdata transmission areas for client panies ? MOU signed in 1998 to cooperate in technology and business opportunities ? Joint venture providing endtoend data munication service for MNCs set up in 1999 ? Partners bought 12% of China Net for $324 million in private placement ? Strategic alliance to provide safe, efficient data transmission for Singapore panies with subsidiaries, partners in China ? Service agreement to codevelop VPN offerings Operator* 02 PD China Mobile Teles Service Industry 21 IN MOBILE TELECOM SERVICE MARKET, CHINA MOBILE WILL LIKELY REMAIN THE DOMINANT OPERATOR IN BOTH REVENUE… 100%= 1998 1999 2022 2022E 2022E 2022E China Uni China Mobile 66707579828894971218212224242022E 2022E 3 6 3 7 10 Other operators 0 0 0 0 0 US$ Billions, percent CAGR 19982022E Percent 67 18 N/A Source: McKinsey Analysis 02 PD China Mobile Teles Service Industry 22 979488787270646058612222830313231711…AND SUBSCRIBER* SHARE 1997 China Uni China Mobile 3 100%= 5 11 25 43 85 145 155 176 197 218 1998 1999 2022 2022E 2022E 2022E 2022E 2022E Other operator(s) Millions, percent * 0205 forecast are subs after inactive and multisimcard reduction Source: Deutsche Bank。 JP Man。 McKinsey analysis 02 PD China Mobile Teles Service Industry 23 * 0205 forecast are subs after inactive and multisimcard reduction ** Acquired by CMHK from parent in Oct 2022 Source: JP Man。 Industry interviews。 McKinsey analysis PROPORTION OF EACH OPERATORS’ SUBSCRIBERS* INCLUDED IN LISTED ENTITY Millions, percent China Mobile 1998 1999 2022 2022E 2022E 2022E 2022E 2022E 66 61 68 65 66 66 CMHK 100%= Uni 1998 1999 2022 2022E 2022E 2022E 2022E 2022E 62 63 65 61 61 62 Uni Listed 100%= 86 82 CMHK Provinces ? Beijing** ? Fujian ? Guangdong ? Guangxi** ? Hainan ? Hebei** ? Henan ? Jiangsu ? Liaoning** ? Shandong** ? Shanghai** ? Tianjin** ? Zhejiang Uni (HK) Provinces ? Anhui ? Beijing ? Fujian ? Guangdong ? Hebei ? Hubei ? Jiangsu ? Liaoning ? Shandong ? Shanghai ? Tianjin ? Zhejiang 41 28 Listed pany 02 PD China Mobile Teles Service Industry 24 05101520251997 1998 1999 2022 2022E 2022E 2022E 2022E 2022ECHURN IS ALREADY SIGNIFICANT WITH BOTH OPERATORS AND WILL CONTINUE TO INCREASE DRIVEN BY INCREASING COMPETITION WITH IMPACT GREATEST ON CHINA MOBILE Percent China Mobile HK China Uni Comments ? China Mobile39。s broader work coverage leads initially to far lower churn rate than for China Uni ? China Uni39。s rapidly expanding work and higherquality CDMA connection will increase CMHK39。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。 Company annual report 02 PD China Mobile Teles Service Industry 25 Comments ? Decreasing trend due to –Increased petition and lower tariffs –Increased mix of lowvalue prepaid users –Deepening peration which increases lowvalue usership ? China Mobile39。s ARPU higher due to –Higher prices than China Uni –Greater concentration of highend users because of breadth of coverage and market presence 051015202530354045501998 1999 2022 2022E 2022E 2022E 2022E 2022ECHINA MOBILE ENJOYS GREATER ARPU, ALTHOUGH LISTED COMPANIES FOR BOTH OPERATORS GENERATE GREATER ARPU THAN UNLISTED CMHK Uni (listed) CM (unlisted) Uni (unlisted) US$/month Source: Deutsche Bank。 McKinsey analysis 02 PD China Mobile Teles Service Industry 26 * 100% = million subscribers in 2022 and million in 2022 ** 100% = million subscribers in 2022 and million in 2022 Source: Goldman Sachs。 Man Stanley。 Team analysis 1 1 . 01 9 . 09 . 01 5 . 02 7 . 81 2 . 36 . 68 . 86 CHINA MOBILE39。S ARPU EXCEEDS CHINA UNICOM39。S DESPITE A LARGER PROPORTION OF PREPAID CUSTOMERS Blended ARPU US$/month CMHK China Uni (listed) 2022 2022 CAGR Percent 5 Prepaid vs. postpaid ARPU parison USD/month CAGR Percent 5 2 7 . 11 2 . 37 . 71 0 . 62022 2022 0 CMHK China Uni (listed) 1 4 Prepaid subscribers as percentage of total subscribers Percent CAGR Percent 19* 2022 2022 C