Opportunities and Challenges of Operating Both GSM

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Opportunities and Challenges of Operating Both
GSM CDMA Networks

• Dr. William Li
• General Manager
• Marketing Sales Dept.
• China Unicom

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Objective

• China Unicom and the Environment
• Opportunities and Challenges of Operating
• Two Networks
• Take the Opportunities and Face the Challenges
• Progress Report and Future Challenges

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Operate Both GSM CDMA Networks

• Unicom is the only carrier to operate both world
  class size GSMCDMA network
• As of the end of 2003, Unicom has
• 73M GSM subscribers and rank 3 in the world
• 19M CDMA subscribers and rank 2 in the world
• Unicom does not choose to operate two networks
• It is a great opportunity and challenge in terms
  of technology, management, marketing, etc.

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History of Telecom Reform in China

• 1994 -- Unicom was founded as a result of
  telecommunication
• De-regulation
• 1998 Ministry of Post and Telecom was dissolved
  and Ministry of
• Information Industry (MII) was
  established.
• 2000-- China Mobile was spin off. China Telecom
  and China
• Satellite was established
• 2002-- China Telecom was split into two carriers
  China Telecom
• and China Netcom
• Now-- China has 6 carriers
• China Telecom China
  Netcom (Fixed Line Operator)
• China Mobile China
  Unicom (Mobile Operator)
• China Satellite China
  Railcom (lt 1 Market Share)
• Plus more than 4,000 VAS
  companies

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The Only Integrated Service Provider

• Main Business
• Cellular Mobile Services(GSM?CDMA)
• National and International Long Distance
• Service
• Data Communication Service
• Internet Service
• IP Telephony Service
• Radio Paging Service
• Satellite Communication Service
• Local Telephony Services in 3 provinces

Wireless business generates more
than 85 revenue
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Milestones Of Unicom Wireless Development

• Jul. 1995 Launched GSM service in Beijing,
  Tianjin, Shanghai and Guangzhou.
• Feb. 2000 Signed the frame contract of
  intellectual property with Qualcomm
• Mar. 2001 Started CDMA network bidding process
• Dec. 2001 Built a nation-wide CDMA network.
• Jan. 2002 Launched CDMA network.
• Mar. 2002 - Upgrade the network to CDMA 1X and
  launched U-MAX wireless data service

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Milestone of China Mobile GSM Business

• 1994 Launched the GSM service in Guandong
  province
• 1995 Launched the GSM service in 15 province
• 1996 Provided the nation-wide and international
  roaming
• 2001 Introduced GPRS as a commercial trial
• 2002 Launched GPRS MMS in the nation

Market Share
of Subs. Million
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Objective

• China Unicom and the Environment
• Opportunities and Challenges of Operating
• Two Networks
• Take the Opportunities and Face the
• Challenges
• Progress Report and Future Challenges

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Opportunities Of Operating Two Network

• CDMA provides the opportunity for Unicom to win
  the competition
• Rebuild the brand
• Achieve the bandwidth efficiency
• Offer fast data service in 2.5G
• Learn the success experiences form Korea and
  Japan
• Cost less to migrate to 3G in the future
• More bandwidth resource only CDMA license

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Challenges Of Operating Two Networks

• Very strong competitor China Mobile
• How to develop CDMA business without
  cannibalizing our GSM business
• How to introduce CDMA service in a GSM dominant
  country
• 110M GSM subscribers and 8 years service history
• Mature handset production and distribution
  industry
• SIM card
• How to position the two network services
• Both network compete for the company resource
  investment, management time, marketing efforts,
  etc.
• Great Challenge !

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Market Share of 4 Major Carriers in 2002
Challenges (1) A Strong Competitor
China Mobile profits is more than 50B RMB
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Challenges (2) Important of GSM Business

• Generate the majority of the revenue and more
  than 100 profits
• Has growth momentum and great potential

subscribers (10,000)
CDMA service introduced
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Objective

• China Unicom and the Environment
• Opportunities and Challenges of Operating
• Two Networks
• Take the Opportunities and Face the
• Challenges
• Progress Report and Future Challenges

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Offer the Differentiated Service - Network

• Improve the Network Quality
• Took less than one year to built a nation-wide
  CDMA
• network with a capacity of 15M subscribers
  in 2001
• Upgrade the network to CDMA 1X within 15 months
  and increase the capacity to 35M subscribers in
  the early 2003
• Started our 3rd phase expansion in 2003
• Spend more than 10B RMB to improve our GSM
  network in last 2 years

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Offer the Differentiated Service - Marketing

• Creative Marketing Efforts
• Marketing CDMA service by using detachable UIM
  card
• Bundled the handset with service
• Signed NBA star Yao Ming as a speaker person for
  New Horizon Brand (CDMA service brand) and become
  the Chinese Basketball Asso. (CBA) exclusive
  sponsor
• Offer various voice and data tariff package and
  promote the marketing slogan of Offer the
  choices to customers on both network service.

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Offer the Differentiated Service - VAS

• Wireless Value Added Service
• Launched 5 types of wireless data service based
• on CDMA 1X to exploit the fast transmission
  speed

WAP Service
Multi Media Mail
Brew Java Service
GPS One Service
PC Connection Card
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Offer the Differentiated Service - Position
In CDMA 95A Phase Position GSM service to the
middle and lower end of ARPU customers. Position
CDMS service to high and middle end of ARPU
customers In CDMS 1X Phase (Positioning) Position
GSM service to customers Main usage voice
and SMS, international roaming (EU) Profile -
Value sensitive Position CDMA service to
customers Main usage Data, SMS, Voice
Security Profile Youth, Fashion,
Profession
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Offer the Differentiated Service - Partners

• Handset Vendor sand Channels, and CP/SP are
  Strategic Partners
• Worked with channels and increase the outlet from
  
• a few thousand to more than 40.000
• Established better communication channels with
• handset vendors to develop suitable product
• The price gap between GSM and CDMA handsets
• are significantly reduced
• Increased the CP/SP number and formed JV with
• SKT and Qualcomm to provide more contents

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Objective

• China Unicom and the Environment
• Opportunity and Challenge of Operating
• Two Networks
• Take the Opportunity and Face the
• Challenge
• Progress Report and Future Challenges

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Results Market Share Increase
Increase the subscribers and market share rapidly
(million)
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Results Revenues Data Usage Increase

• Increase the revenue more than 30 in 2003
• More subs. use data service

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Results Wall Street Reward
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Future Challenges

• To upgrade and expand both networks is great
• challenge
• Offer GSM/CDMA dual mode system to resolve
• many issues
• Provide CDMA customers to international
• roaming in EU
• Provide GSM customers to access CDMA 1X
• data service
• Resolve the number portability problems
• partially

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Thank You!