Ramsey:
As part of a broader exercise of trying to develop some forward projections of revenues and earnings for QCOM through 2005, I found myself needing to understand Unicom's corporate and operating structure better than the somewhat superficial view that I had. The following is a necessarily brief summary of the essentials of what I gathered from a fairly detailed review of publicly available material. I'm sure others will find important points I've missed in the links and references below.
The organizational structure of the Unicom companies is clearly shown on the China Unicom Limited (the "listed" company CHU) website:
chinaunicom.com.hk
and some detailed descriptions of how this structure evolved can be found on the same website:
chinaunicom.com.hk
The wholly state-owned "parent" company - China United Telecom Corp or simply "The Unicom Group" owns 77.47% of CHU (which was incorporated in Hong Kong in February 2000), the remaining 22.53% being publicly owned via the IPO in June 2000.
The operating company, China Unicom Corporation Limited (CUCL), is a wholly owned subsidiary of CHU, and actually runs the cellular, domestic and international long distance, data communications, paging, and internet services.
The only entity not shown in the organizational structure described above is "Unicom New Horizon", which is a wholly owned subsidiary of the state owned parent Unicom Group, which was formed solely for the purpose of constructing the CDMA network, thereby freeing the listed company CHU from the capital burden - and potential financial risk - of actually constructing the CDMA network. The operating arm CUCL is leasing CDMA network capacity from Horizon, pursuant to the terms of the "Lease Agreement", which is worth a read and which you can find here:
chinaunicom.com.hk
The lease agreement spells out that CUCL is leasing capacity from Horizon in the "listed service areas" served by CHU and its operating arm CUCL. The "listed service areas" comprise the nine provinces of Guangdong, Jiangsu, Zhejiang, Fujian, Liaoning, Shandong, Anhui, Hebei and Hubei, and the three directly administered municipalities of Beijing, Shanghai, Tianjin. The "listed service areas" are shown in blue on slide 18 of CHU's "CDMA Presentation" (also worth a read), which you can find here:
chinaunicom.com.hk
or in smaller form, here:
chinaunicom.com.hk
The capacity of the CDMA network in CHU/CUCL's "listed service areas" is 9.18 million, and it is that portion of the CDMA network to which the lease agreement applies. These "listed service areas" are also what all of CHU's operating data - subs, MOU, ARPU, etc. - for both the CDMA and GSM networks pertain.
The capacity of the CDMA network in the "non listed service areas", i.e. in the 18 provinces still served by the parent Unicom Group's operating arm and which are shown in yellow/orange on the slide 18 map, is 5.97 million. At present, I have been unable to find out anything about subs, ARPU, MOU, etc. for this portion of the CDMA network (or the GSM network in those regions either), but it's certainly possible that the old Great Wall CDMA subs are part of that service area, and are not in CHU's totals. The Unicom parent company website:
chinaunicom.com.cn
may shed some light here, but it's only presently in Chinese (English version "under construction", like the CDMA network <g>), maybe you or ML could take a look for us (Babblefish was not much use). There is a "CDMA" link on the home page which leads to some interesting looking flash demo stuff, but I didn't spend too long on it.
Next to finally, there was a pertinent comment in today's earnings release:
chinaunicom.com.hk
China Unicom is considering the acquisition of GSM cellular businesses and other assets in the remaining 18 provinces in Mainland China from its parent company at an appropriate time. This will assist the Company to set up a solid foundation for its future business development.
which indicates that consolidation of the "listed" and non-listed" service areas under CHU/CUCL is in the cards in the not too distant future.
Finally, a last key point here: the state owned parent Unicom Group coughed up the 24 billion RMB to build out the initial CDMA network, not the listed company, and so the state owned company will make sure that CDMA is a success, no matter what Euro analysts like Tero and many US analysts say. As a point of reference, today's CHU earnings release shows that CHU spent 20.78 billion RMB in expanding its GSM network in its listed service area in 2001, to accommodate the 14.26 million GSM subs they added last year, plus presumably some capacity for 2002 sub adds to the GSM network.
Hope all this helps us to see through some of the obvious fog. It certainly helped me.
David T. |
