News and Research on China Netcom Group Corp. (CN)
Business Description
China Netcom Group Corporation (Hong Kong) Limited operates broadband communications and fixed-line telecommunications in China. The company provides fixed-line telephone services, broadband and other Internet-related services, as well as business and data communications services in its northern service region.
Services
The company is a broadband communications and fixed-line telecommunications operator in China and a provider of fixed-line telephone services, broadband and other Internet-related services, business and data communications services, as well as information and communications technology services in the company’s northern service region. The services that it offers include: fixed-line telephone services (including Personal Handyphone System, or PHS services), including local, domestic long distance and international long distance services; broadband and other Internet-related services, including XDSL, LAN, wireless and other Internet access services, broadband content and applications services; business and data communications services, including managed data and leased line services; and information and communications technology services, including services such as system integration, software development, maintenance and consultancy.
Fixed-line telephone services (including PHS)
The company provides fixed-line telephone services in the company northern service region. The company’s fixed-line telephone services consist of local telephone, domestic long distance, international long distance, value-added and interconnection services. The number of the company fixed-line subscribers in the company northern service region included 114.0 million as of December 31, 2006.
For urban subscribers, the company provides bundled services under the brand name of ‘Family 1+’ and ‘Unified Number’ with both fixed-line and mobile functionalities; For campus subscribers, it offers ‘New Sunshine’ service to provide more SMS and family calls; and For rural subscribers, the company offers the ‘Economical Phone,’ a bundled voice and value-added service, which does not charge monthly fees to encthe companyage higher voice traffic and value-added-service usage.
As of December 31, 2006, the company PHS services were provided in regions covering approximately 100 area codes in the company service regions. The company PHS services focused more on selected consumer segments such as hospitals, school campus, hotels and other commercial buildings, and were offered as a main component of the company bundled services.
The company also operates a network of approximately 6.9 million public telephones located in the company northern service region in China. It provides local, domestic long distance and international long distance call services and Internet services through its public telephones.
Local telephone services: In 2006, total usage in local telephone services was 217,270 million, which included 5,271 million Internet dial-up usage. Total usage of local telephone services excluding Internet dial-up usage was 211,999 million.
Domestic long distance services: The company offers traditional long distance services and VoIP long distance services in its northern service region, primarily through VoIP in the company southern service region.
International long distance services: The company is a provider of international long distance services in its northern service region. Its principal outgoing international long distance calls are to Hong Kong, Taiwan, the United States, Japan and South Korea.
Value-added services
The company, in addition to basic telephone services, offers a range of value-added services, including caller identification, PHS short messaging and ‘personalized ring’ services. Personalized ring service enables the company traditional fixed-line telephone and PHS telephone to emit a distinctive ring for incoming calls designated numbers.
The company, in 2006, introduced additional value-added services, including ‘Phone Navigation,’ ‘Phonemate’ and ‘Concealed Number.’ These services increased the usage of voice traffic through the company fixed line network and increased the company’s average revenue per unit. Upon completion of upgrading the company network to allow intelligent functionalities, new value-added services can be offered on a large scale in the company service region. In 2006, 7.8 billion PHS short messages were sent from the company’s network. The number of subscribers to the company’s ‘personalized ring’ services included 15.8 million as of December 31, 2006. In addition, it provides telephone information, teleconferencing, video conferencing, voice mail services.
Broadband and other Internet-related services
The company provides broadband and other Internet-related services in its northern service region.
Broadband services
The company offers broadband services in its service regions. In 2006, it continued to develop broadband business model focusing on providing access through computers and television set-top boxes and charging fees on access and content and adopted measures such as selectively upgrading the company network speed, introducing diversified products to satisfy the needs of different market segments. In 2006, the company established ‘China Netcom Group Broadband Online Limited Corporation,’ a wholly-owned subsidiary of CNC China specially designated for broadband content and launched the first comprehensive audio-visual entertainment portal in the PRC ‘CNC MAX.’ As of December 31, 2006, 1,267 hotels offered to their guests broadband services provided by the company. It provided them comprehensive communication and information services including information technology applications and basic communication products. The company’s broadband subscribers included 15.08 million as of December 31, 2006.
DSL services
The company promotes DSL services as the primary broadband service means for residential customers and small and medium-sized enterprise customers in the company’s northern service region. It provides DSL services by upgrading the company’s existing copper-based local switching network. In the company’s northern service region, where it is a fixed-line operator, the number of subscribers to its DSL services included approximately 11.4 million as of December 31, 2006.
LAN services
The company, in addition to DSL technology, also uses Ethernet technology-based local-area networks, or LANs, to provide the company customers with broadband services. As of December 31, 2006, the company had 3.7 million subscribers.
Internet application-related services
The company has entered into cooperation arrangements with content and applications providers in the businesses of live webcasting, virtual theater, video conferencing, IPTV, online education, and broadband games. In addition to basic services such as games, video and portals, the company has also launched a series of services catering to the specific needs of local markets and industry subscribers, namely, an integrated tax payment services platform, digital libraries and digital photo-finishing. In 2006, the company was granted a right to provide IPTV services in five cities, including Heihe and Mudanjiang of Heilongjiang Province, Shenyang, Dalian and Panjin of Liaoning Province and began providing information technology services for the rural areas based on IPTV technology in Henan Province. The number of IPTV subscribers reached 144.5 thousand as of December 31, 2006.
The company also operates Internet data centers, which provide co-location and website hosting services to business customers that lease servers, routers and other network components for Internet-related solutions. These services are used primarily by business customers seeking to outsthe companyce the infrastructure needed to utilize the Internet effectively.
Dial-up and dedicated Internet access
The company is the provider of dial-up Internet access services in its northern service region. It offers high speed Internet access through dedicated lines to its business customers, particularly communications-intensive corporate customers. As of December 31, 2006, the company had a total of approximately 1,800 dedicated Internet access subscribers in the company’s northern service region. It bundles this service with voice and data services to provide integrated communications solutions to the company business customers.
BUSINESS AND DATA COMMUNICATIONS SERVICES
The company provides business and data communications services in the northern service region. It bundles the data communications services together with fixed-line telephone services and broadband services to attract communications-intensive corporate customers.
The company offers managed data products, such as DDN, frame relay, ATM and IP-VPN, and leased line products, including domestic and international leased circuits. Its customers for these services include government entities, large financial institutions and other domestic and multinational businesses, ISPs and other telecommunications operators. The company focuses on diversifying the company business and data communications services and products and providing customer service its large corporate and carrier customers.
Managed data services
The company provides a variety of managed data services to its business customers, including DDN, frame relay, ATM and IP-VPN services.
DDN services
DDN systems, composed of fiber-optic cables, digital transmission paths and digital nodes, are capable of providing private circuits and other services at various speeds to satisfy the multimedia communications needs of customers. The company’s DDN services provide transmission at speeds ranging from 9.6kbps to 2Mbps to meet the increasing demand for low- to medium-speed transmission capacity from business customers and government agencies.
Frame relay and ATM services
The company offers high-speed data communications services based on frame relay and ATM technologies to major business customers, including multinational corporations, government agencies and financial institutions. These services enable use of bandwidth resthe companyces. The company’s frame relay service provides data transmission services linking different business sites for high volume data traffic.
IP-VPN
The company’s IP-VPN service targets business customers that require direct IP connections between multiple sites. These customers are provided with private networks connected to the company Internet backbone network and intended for secure data transmission.
Leased line services
The company provides dedicated leased line services to businesses, government agencies and other telecommunications operators in the company’s northern service region. These leased lines allow point-to-point connection for voice and data traffic. Leased lines are used by business customers to assemble their own private networks and by telecommunications operators to establish their service networks. The company leases network elements, including digital circuits, digital trunk lines and optical fibers, to business and government customers as well as other telecommunications operators. The company, as of December 31, 2006, leased circuits totaled 171,249 (x2Mbps) in bandwidth, including 147,459 (x2Mbps) in bandwidth to business customers.
Information and communication technology services
The company offers information and communication technology services. It provides integrated services of system integration, software development, management applications and fixed-line communication. It provides custodian services to small and medium size enterprises through the company’s proprietary ‘IT Platform for Small and Medium Enterprises’; comprehensive system consulting and industry application system services to large enterprises; and LAN services and outsthe companycing services to governmental customers.
Strategic Alliance with Telefonica
The company, in November 2005, entered into a strategic alliance agreement with Telefonica Internacional S.A., or Telefonica, pursuant to which the company and Telefonica identified various areas in the telecommunications business for potential cooperation.
Significant Events
Sale of Asia Netcom: As of August 22, 2006, the company sold its 100% equity interest in Asia Netcom to Connect Holdings Limited.
Sale of Southern Service Region Business: As of February 28, 2007, the company sold its telecommunications assets, liabilities and business operations in its southern service region to China Netcom Group.
Competition
Fixed-line telephone services: The company competes with China Telecom, China Unicom and China Railcom, each of which has been licensed to provide fixed-line telephone services in its northern service region.
Internet-related access services; business and data communications services; information and communications technology services: For Internet-related access services and business and data communications services, the company competes with China Telecom, China Unicom, and China Railcom. Its major competitors for information and communications technology services are other telecommunication operators such as China Telecom, and system integration service providers such as Digital China Holdings Limited and Taiji Computer Corporation Limited.
History
China Netcom Group Corporation (Hong Kong) Limited was founded in October 1999 as Target Strong Limited and changed its name to China Netcom (Hong Kong) Corporation Limited in December 1999. Further, it changed its name to China Netcom Corporation (Hong Kong) Limited in 2000 and to China Netcom Group Corporation (Hong Kong) Limited in 2004.
