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Understanding the Chinese Wireless Market and Capturing Growth Opportunities

Understanding the Chinese Wireless Market and Capturing Growth Opportunities. Jing Wang Senior Vice President Chairman QUALCOMM China. Presentation Topics. Telecommunications Industry in China Today Wireless Market Environment Market Opportunities with CDMA Challenges Conclusion.

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Understanding the Chinese Wireless Market and Capturing Growth Opportunities

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  1. Understanding the Chinese Wireless Market and Capturing Growth Opportunities Jing Wang Senior Vice President Chairman QUALCOMM China Aug 1 - Rev 06

  2. Presentation Topics • Telecommunications Industry in China Today • Wireless Market Environment • Market Opportunities with CDMA • Challenges • Conclusion Aug 1 - Rev 06

  3. Population: 1.3 Billion GDP: $1.4Trillion (2003), the sixth largest economy in the world (excluding Hong Kong, Taiwan and Macao) China Overview Telecommunicationsmanufacturing, sales and services in China are more than one third of national GDP (Gross Domestic Product) Aug 1 - Rev 06

  4. Telecom Industry Statistics - As of Dec. 2003 Fixed Line Users 263.3 Million Penetration Rate 20.4 % *Mobile Users 268.7 Million Penetration Rate 20.8 % Internet Users 79.5 Million *China has the largest number of mobile users in the world. Aug 1 - Rev 06

  5. 2003 China Telecom Industry Revenues • Domestic telecommunications industry continues to evolve: • Data services are accelerating due to increased internet usage and new digital networks. • Paging business continues to decline due to competition from other wireless services (mobile). • Land line services remain strong as PHS (“Little Smart”) expands rapidly. • Mobile business is the growth engine of the telecomm industry. • New services (location based services, e-mail, etc.) are growing fast, but are still insignificant overall. Aug 1 - Rev 06

  6. Major Players in China Telecom Industry Revenue: $ 8.1 B Capex: $ 4.83 B (EST) Subscribers: 92.0 M (CDMA & GSM) CDMA Subs.: 19.1 M 2003 Revenue: $ 19.2 B (CMHK) 2003 Capex: $ 7.9 B (EST) 2003 Subscribers: 173 M (GSM ) Revenue: $ 17.56 B Capex: $ 7.37 B (EST) Subscribers: 160 M (Fixed Line) Broadband Subs: 7.35 M Revenue: $ 8.81 B (EST) Subscribers: 88.45 M (Fixed Line) Broadband Subs.: 10 M

  7. Major Players’ Roadmap for Wireless China Unicom (CU) continues to expand its CDMA network. In 2002, the network was upgraded to 1X. Now CU is about to finish its Phase III expansion with a total network capacity of appr. 55 M subscribers. CU also plans to launch dualmode service in July 2004. Since 2000, China Mobile (CMCC) has focused on deploying GPRS, which turned out to be unsuccessful. CMCC slowed its deployment in 2003. Many expect it to migrate to WCDMA next year In 2001, former China Telecom (CT) split into China Telecom for Southern China and China Netcom (CNC) for Northern China (with former CNC and Jitong). CT is very anxious to obtain a mobile license. CT has actively deployed CDMA-based WLL systems at 450 MHz and 1900 MHz, and PAS, with approximately 30 M users. CT has not decided its choice of 3G standard. CNC is very interested in mobile business. It has been deploying WLL (or limited mobility-based) CDMA 450, and PAS systems. CNC is currently investigating its 3G strategy. Aug 1 - Rev 06

  8. Presentation Topics • Telecommunications Industry in China Today • Wireless Market Environment • Market Opportunities with CDMA • Challenges • Conclusion Aug 1 - Rev 06

  9. Major Government Agencies Shaping China’s 3G Outlook Selection of 3G Standards / Issuance of New Mobile Licenses Decision Makers: - State Council - SDRC (State Development and Reform Commission) - MII (Ministry of Information Industry) - MOST (Ministry of Science & Technology) Key Influential Groups: - State Council Information Industry Leading Group - State Council Development Research Center - MII 3G Expert Group - Operators and Vendors Aug 1 - Rev 06

  10. China Wireless Market – As ofDec. 2003 In Million Subscribers Total number of mobile subscribers: 268.7 Million China Mobile: approx.173 Million(Market Share: 65%) China Unicom: approx. 92 Million, including 19.1 Million CDMA subscribers and 72.9 Million GSM subscribers (Market Share: 35%) Wireless penetration rate: 20.8% Aug 1 - Rev 06

  11. Mobile Subscriber Preferences • Short/Long Text Messages • Ring Tones/Music Download • Daily Info. (news, weather, transportation, etc.) • On line /Download Games • Greetings Postcard/Image/Pictures • Email (Send/Receive/Notification) • Business Info. (corporate, product, service, etc.) • Taking photo and send photo via camera phone • Location Services (map, etc.) • View Live Programs (sports, major news, etc.) New Services are Growing Mobile Data Market Analysis <December ‘04> In-depth market survey has been conducted among current mobile phone users across 12 major cities (CBD area) in China. 1. Beijing 7. Shen’yang 2. Shanghai 8. Fuzhou 9. Hangzhou 3. Guangzhou 10. Jinan 4. Shenzhen 5. Nanjing 11. Dalian 6. Qingdao 12. Chengdu Aug 1 - Rev 06

  12. Presentation Topics • Telecommunications Industry in China Today • Wireless Market Environment • Market Opportunities with CDMA • Challenges • Conclusion Aug 1 - Rev 06

  13. China Unicom CDMA Subscriber Growth Dec. 03 19.1 million CDMA Subs. (M) 18 16.97 Oct. 30 17 15.82 Sept.18th 16 14.55 Sept.5th 15 13.7 Aug.15th 14 12.75 Jul.27th 13 11.65 Jun.30 12 11 Nov. Oct. July Sept. Aug. 2003 China Unicom CDMA Subscriber Growth Growth of CDMA industry creates new opportunities for industry players especially in the data services sector

  14. China’s 3G Prospects - All CDMA Technologies are Under Consideration ? ? • China Telecom and China Netcom do not have mobile licenses yet. • Datang, a Chinese telecom vendor and Siemens co-developed TD-SCDMA which is considered a “home-grown” technology in China. The government strongly supports TD-SCDMA, allocating 155 MHz in 3G spectrum for TDD (TD-SCDMA) as an incentive. • Government might push for WCDMA and TD-SCDMA combination. • Current market is favorable to CDMA 2000. Aug 1 - Rev 06

  15. China 3G Development • MII 2.1G WCDMA MTnet & Field Trial • Phase 1 lab testing concluded last year • Phase 2 field testing is in progress since the beginning of 2004 • Field trial is expected to be completed by Sept. 2004 • MII 2.1G CDMA2000 MTnet & Field Trial • CDMA2000 1x lab testing finished last year • CDMA2000 1xEV-DO lab testing is in progress since Feb. 2004 • Field testing will commence after the completion of lab testing, approximately end of March • 1x/1xEV-DO field trial will be conducted through Sept. 2004 • MII 3G Standard Evaluation • MII is evaluating the 3G standards based on technical, economic and political considerations; report will be submitted to State Council by the end of 2004 • Led by SDRC, MII and MST will jointly study and formulate China’s 3G development plan Aug 1 - Rev 06

  16. China CDMA Industrial Value Chain QUALCOMM Participates In and Enables Every Link of the Chain Operator Takes Leadership New M-Data Business Value Chain Technology Platform Vendors Infrastructure & Equipment Vendors Application Platform Vendors Application Developers Content Providers Content Aggregators Mobile Portal Providers Mobile Network Operators Handset Vendors Motorola Lucent Nortel Ericsson Samsung ZTE ISP Mobile Operator “M-PORTAL” Samsung LG ZTE Motorola Toshiba Sanyo Kyocera Soutec HiSense Capitel Haier Bird Konka TCL Eastcom Xoceco ICP ASP Aug 1 - Rev 06

  17. China Unicom & QUALCOMM BREW Joint Venture • Unicom – BREW Telecommunications Technologies Ltd. was formally established in China on March 18, 2003 • Through this joint venture, China Unicom and QUALCOMM agree to cooperate in the following areas: • • BREW Software Licensing • • Application Testing • • Development of Applications • • Technical Support Aug 1 - Rev 06

  18. Accuracy Influences Location-Based Services Cell/Cell Sector ≈ 500m-≥5km “What town?” EOTD/OTDOA ≈ 100m-500m “What part of town?” gpsOne ≈ 5-50m “What street corner?” Better accuracy = more services & value gpsOne in China • China Mobile & China Unicom will compete fiercely on High Precision LBS in 2004 and beyond • China Unicom has deployed Assisted GPS (AGPS) LBS in all major cities. • China Mobile has launched Cell-ID based LBS (low precision), may consider adopting AGPS • China Unicom and QUALCOMM jointly launched “Three Cities” Marketing Campaign around Valentine’s 2004 • Build market awareness through local promotional events • Market launch in Beijing, Shanghai, and Guangzhou • Position China Unicom as the leader in offering fun, innovative, life-enhancing products • Events include “Treasure Hunt” for men and women using AGPS Aug 1 - Rev 06

  19. 1xEV-DO and GSM1x • Unicom will launch C&G July 19, 2004 using multimode multiband CDMA/GSM handsets branded as “World Wind.” Unicom intends to achieve three main objectives with C&G: • Give its GSM users access to CDMA data • Support international roaming • Attract high-end GSM users • 1xEV-DO will further strengthen Unicom’s position in providing value-added services • Unicom completed technology trial with 6 infrastructure vendors in 2003 • Unicom plans to conduct pre-commercial trial to evaluate applications and services in 2004 Aug 1 - Rev 06

  20. Presentation Topics • Telecommunications Industry in China Today • Wireless Market Environment • Market Opportunities with CDMA • Challenges • Conclusion Aug 1 - Rev 06

  21. Market Challenges • • Uncertainties surrounding the issuance of 3G licenses • • Government’s involvement in 3G technology selection • • Lack of IPR licensing agreement for WCDMA and TD-SCDMA • • Government’s pursuit of “home grown” technologies at the expense of market interest • • Uncertainties in market demand for high speed wireless data Aug 1 - Rev 06

  22. Presentation Topics • Telecommunications Industry in China Today • Unique Wireless Market: Political, Legal and Technical Environments • History of CDMA in China • QUALCOMM’s China Operations Today • Conclusion Aug 1 - Rev 06

  23. • China market continues to provide high growth opportunities • Rapid growth of CDMA introduces new compelling data services and opens up new supporting industries • Chinese manufacturers start exporting CDMA products • Issuance of 3G license will lead to further market development Conclusion Aug 1 - Rev 06

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