Archive for July, 2009

Apple & China Unicom receive regulatory approval for iPhone launch

china unicom iphoneGasp … shock … applause, yes, according to tech website Engadget this morning, China Unicom & Apple have managed to get regulatory approval fromChina’s State Radio Regulatory Commission.  As Engadget states :

According to the listing, we’re looking at a GSM / WCDMA cellphone complete with Bluetooth, an internal model number A1324, a little-known manufacturer called “Apple Inc.” and an approval date of May 7th, 2009. We’re also told that the certificate expires in five years, which should give China Unicom plenty of time to capitalize on its reported three-year deal to offer the phone in mainland China.

A copy of that filing can be viewed here : Approvals (luckily for us, Google translate is working well) & here is an image of the actual filing itself :

china-iphone-approval

Engadget goes on to play this down, as there have been a plethora of iPhone / China stories ever since the first iPhone came on the scene two years ago. However, scooting around some telecom pit stops & also some Apple watchers, it would seem that there is real credence in this story. Over at iPhon Asia, Dan Butterfield, a veteran Asian mobile commentator, has been doing our job for us, with a regular stream of articles on the iPhone, here are a couple of lifts from him in the last week in reverse order :

Press reports along with some documentary evidence, suggests that a new model iPhone was submitted to China’s authorities for mandatory “testing” sometime in late Spring. The MIIT’s testing process can take several months to complete. Foot-dragging by the MIIT might help China’s carriers to deploy their own Android-based phones + new WVAS + new mobile operating systemsbefore iPhone is launched.

Multiple reports that Foxconn (Hon Hai Precision) will soon begin full production of a custom iPhone for China. This model will not have WiFi (due to WAPI/WiFi issues) but will likely come preloaded with several “for China” apps. Foxconn has given this iPhone a code name – “Model 90.” There is a very high probability that Model 90 is the same “yet to be unveiled” iPhone model (A1324) that China granted (in early June) a Radio Transmission Equipment Type Approval Certificate (RTETAC). China website Tech.QQ has posted a story today about China Unicom’s plans to bring iPhone to China. The report quotes anonymous “informed sources” who claim that Apple and China Unicom have finalized their deal to officially launch iPhone in China. The report does not mention when China’s Ministry of Industry and Information Technology (MIIT) might grant Apple’s iPhone the required Network Access License (NAL).

China’s Oriental Morning Post is jumping into the iPhone rumor mill. In a report today the Post reveals that China Unicom is in the midst of intense iPhone promotion/distribution planning. The Post reports that the new iPhone model for China will retail for 2,000 CNY ($293 USD) for subscribers who choose a data-plan + multi-year contract. This subsidized price would be 1,000 CNY below the reported (yesterday’s unverified rumor) 3,000 CNY ($440 USD) that China Unicom will pay to Apple for each unit. The Post notes that there will be other plan options that further reduce iPhone’s retail price. The Post sites “Shanghai Unicom*insiders” who provided information on condition of anonymity.

Now, lets go all the way back to the first quote & concentrate on the highlighted text (my addition), Dan reported this regulatory topic back on the 25th July in his post : iPhone in China – “Are we there yet?”

So thanks Engadget for “breaking” some news that was already out there & Big Kudos for Dan for sticking at it & being objective.

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Vodafone steps up to the plate, backed up by Emerging Markets

vodafoneLast week Vodafone Group (NYSE:VOD) released an interim management statement that considering the current economic climate, I consider to be pretty upbeat. I have been a long term holder of Vodafone stock on the London Stock Exchange & have over the last year traded the NYSE traded ADR up & down on swings. However with the current market, I am now looking for some growth & value plays. Looking a little closer at the report & doing some quick analysis of some of the major themes contained, I am now quite bullish on VOD going forward & will be picking up some shares for my investment portfolio. As of writing Vodafone was trading at £121.00 in London & $19.64 in New York.

Comment from : Vittorio Colao, Chief Executive

“In the first quarter the service revenue trend in Europe was consistent with the previous quarter and we continued to see good growth in India and South Africa. Our total communications strategy is delivering well, with organic data revenue up 19% and organic fixed line revenue 7% ahead of the comparative period. Free cash flow generation was strong at £1.9 billion, up 21%. The Group has reaffirmed its guidance for the full year.”

Highlights from the report :

  • Group: Revenue £10,743 million, up 9.3%
  • Group data revenue of £888 million, up 19.4% on an organic basis
  • Free cash flow of £1,896 million, up 21.2%; net debt at 30 June 2009 of £31.2 billion
  • Cost reduction programme on track
  • Proportionate mobile customer base of 315.3 million; 8.0 million net additions during the quarter
  • Europe: Service revenue up 4.4% driven by FX benefits. Data revenue up 17.8%. Fixed line revenue up 5.7%
  • Africa & CEE: Service revenue up 26.3% including Vodacom acquisition,Vodacom organic growth of 5.2% offset by weakness in CEE
  • Asia Pacific and Middle East: Service revenue up 21.8%
  • India service revenue growth of 23.0%

Interesting to see Vodafone making a point of mobile data revenues & 19.4% grwoth is a pretty impressive statistic. Much of this being driven out of Europe, where one of the big booms in mobile data is the popularity of 3G wireless broadband dongles (USB sticks) on “Unlimited” packages, which all the major operators have adopted. Vittorio Collao announced a major cost cutting initiative last November 2008, targetting cost reductions of $1.45Bn by  the end of the 2011 financial year in order to offset the pressures from inflation and the competitive environment and to enable investment in revenue growth opportunities. Savings of more than 65% of this target are expected to be generated by the end of the current financial year.

Vodafone has been at the forefront of network sharing, originally this started in the UK with Orange, now the group has signed a pan-European deal with Telefonica-O2, which will see network sharing being implemented in Germany, Ireland, UK & Spain. Analysts see this as a huge positive, as the deal is set for a ten year term & should save each company in the region of $350 million per annum. The growth figure of 8 million subscribers runs in line with analysts global forecasts for 2009 of circa 13%, as Vodafone is one of the higher value operators in each of its markets, the fact that it is expanding subscribers in a high churn market is positive.

“Old” Europe is the only area where Vodafone operates both fixed & mobile services, predominantly in the UK, Ireland, Spain, Potugal & Germany, where it is the second largest provider of broadband via its Arcor business unit. Having already discussed the cost savings initiative with Telefonica, the main story here is on how Vodafone are manbaging to reduce churn & promote ARPU via new services. Vodafone is far & away the leader in all of these markets regards business services (excepting Germany, which is dominated by T-Mobile), with consumer playing a strong supporting role, crucially the majority of these accounts are postpaid, which is reflected in higher service revenues than is the norm in this sector.

Another area that Vodafone is finally catching onto is the machine-to-machine market, or M2M. The company has made some recent investments in this sector & is set to benefit as the market grows from $4.2Bn in 2008, forecast to rise to $12.5Bn by 2012. It’s not all good upbeat news though, as recent EU intervention in roaming charges has had a detrimental effect on voice service revenues aceross the board. Retail termination costs have hit this part of the business very hard, with only Netherlands showing minimal growth of 0.6% mainly due to MVNO operations, whilst at the other end of the scale, Greece voice revenues sank by 15%.

In “new” Europe (CEE) & Africa, the atypical Emerging Markets,  we are presented with a mixed bag, however the region saw service reveues grow by 26.5%, mainly due to Vodacom (of which more later). Vodafone has seen serious competition in Romania, where no less than 6 operators are competing for one of the lowest ARPU generating populations in Europe, the situation not being helped by the extremely poor performance of the Lei versus the Euro. Similarly, Turkey has not been the shining star that Vodafone had expected when it launched their in 2005. However, now that 3G services are finally being launched, Collao today announced that the company would be investing up to $675 million in network infrastructure over the next 12 months, as Turkey has very low fixed line connections, mobile broadband is set to be a revenue enegine. I also have a feeling that as & when Turkey accedes to the EU, plenty of “rural” grant funding will be made available for the three network operators to provide near 100% coverage. At time of writing, there are some rumours of Turkcel & Vodafone entering into limited network sharing on 2G (GPRS) services, but these remain unconfirmed.

Meanwhile, Africa has seen a real boost this year, with Vodafone finally acquiring a majority interest in Vodacom South Africa from Telkom, as we discussed earlier this year in Consolidation hits Rainbow Nations telecom sector; Vodacom is now the flagship Vodafone brand in sub-Saharan Africa & has recently listed on the Johannesburg Stock Exchange. Another hit in this region is Vodafone’s 40% majority holding in Kenya’s Safaricom. Jointly the two companies launched the mobile payment platform M-Pesa back in 2007 & it has gome through a number of modifications & upgrades since then, winning a United Nations award along the way. The service has 5.75 million users signed up in Kenya & now that it has been proved & tested, look to Vodafone to launch M-Pesa in a number of new regions in Africa, such as Nigeria, Ghana & South Africa. An interesting video on Safaricom & M-Pesa can be viewed here : Michael Joseph

Vodafone’s controversial investment in Essar , seems to be paying off handsomely, as the Indian carrier now operates in all 26 mobile circles across the sub-continet. Service revenues jumped by 23% with the subscriber base leaping 56%, or  by 77 million subscribers in the last year. Vodafone will also be launching M-Pesa in India this year & it is thought that up to 17% of the subscriber base will ustilese the m-payment system. Vodafone-Essar recently applied & was granted both a national Internet Service Provider & National Long Distance licences, from the Indian Government, as expectations run high on the “last mile” being finally opened. The NLD licence will have an immediate effect, as Vodafone will now be able to backhaul its own national STD voice traffic & not have to rely on local carriers, which will be a welcome development since mobile voice terminations have fallen by 5% in India in the last year.

In Asia Pacific, there is only one big story & that is the merging of Vodafone Australia & Hutchinson Whampoa’s 3 in order to create a realistic competitor to government owned Telstra. The new Vodafone-Hutchinson Australia is a 50-50 JV, which will carry the Vodafone brand & now has a combined cutomer base of just over 6 million users. Vodafone will be looking to leverage its Vodafone Live! content platform here & significant cost savings on network (roaming charges) can be expected, the combined networks now have 98% coverage of metropolitan areas across the country. Vodafone will also receive a deferred payment of AU$500 million from Hutchison-Whampoa, to reflect the difference in the joint business assets (network).

So all in all, a home run for Vodafone in its first quarter of the current financial year. Considering the global economic environment, I feel that this is a great performance (although possibly helped along by currency rates) & that if the management team can keep a firm grip on the operating companies, Vodafone should be one of the strongest performing telecoms companies for 2009-2010. Continued expansion in both India & Africa, along with the introduction of services such as M-Pesa will attract & hold valuable customers. I’m long on the ADR, having bought in last week at $18.68 & am looking for it to exceed $23.50 within three months.

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Vale to sweep up as Rio “fails” in Chinese espionage fiasco

bulk ore carrierThis post from China News Wrap is significant, as it’s sourced locally from International Financial News, which is a Peoples Party owned newspaper. China informs Australia that proof is irrefutable (sic) Basically the Chinese authorities are not going to back off, having been snubbed over the Chinalco deal. I reckon this will run & be very detrimental for both Rio & BHP Billiton. Anyyone else noted that both firms have been talking up inventories being built up elsewhere ? The real deal is in the 2nd last paragraph of the story :

“At the same time, although Rio Tinto had made statements last week emphasizing that it would ‘continue its iron-ore operations in China’, the actual situation does not seem to reflect this. The overseas media yesterday reported that shipments of spot market iron-ore from Brazil to China soared to record highs in July, which could be related to the Rio Tinto case. Australia seems to have temporarily suspended its exports of spot market iron-ore to China. Data from the shipping company AXSMarine indicates that orders for shipments to China from Australia’s main iron-ore port fell to 12 this month, while orders for shipments from Brazil reached the record high of 31. This means that China’s demand for iron ore is still strong.”

so basically VALE is picking up the slack & would also seem to be enjoying it too, if this piece from Reuters is anything to go by :

Vale Resists China Price Cut Request on Demand Gain

“Politically Vale has done well with its customers by letting the Australians settle first,” Cliff said. In the first quarter, China took 66.5 percent of Vale’s total iron-ore sales of 52.1 million metric tons, up from 32 percent a year earlier.”

Regular readers of MyStockVoice will know that I’m a big fan of Vale, so, long VALE is a no brainer & I have felt that BHP is a little toppy for a week or so, may instigate a short. RTP I’ll leave for bigger fish to swim with.

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Malaysias construction industry builds momentum

petronas kuala lumpurMalaysia‘s construction industry is set to rebound from the slowdown of the local economy, with both private and state funds flowing to new projects that are helping to boost confidence as the country works to increase future supply of infrastructure and property.

On the back of increased funding for construction projects being distributed by the state, part of the government’s $19bn economic stimulus programme, along with other scheduled capital works investments, analysts are predicting solid growth for the industry and are recommending investors to buy into local construction stocks.

According to Terence Wong, an analyst at CIMB Investment Bank, stocks in the building sector will outperform the rest of the Malaysian market, with enough projects being launched to benefit all companies in the sector.

“Construction is the must-own sector in Malaysia because pump-priming will come through and it will come through aggressively over the next few years,” Wong told the Bloomberg news agency on July 20.

Shares in some of Malaysia’s largest building companies, such as Gamuda, IJM Corporation and WCT have performed strongly, and the construction index of the Kuala Lumpur stock exchange has gained 27% so far this year. Shares in all three companies have risen by some 50% this year.

CIMB is not the only one advising investors to plough into construction stocks, with OSK Research upgrading its recommendations for WCT from “trading buy” to “buy” on July 20 after the firm won four infrastructure contracts worth more than $210m.

The government too would welcome the apparent upswing in the construction industry, being able to point to concrete results from its stimulus package at a time when some analysts are still predicting a slow recovery.

A recent report from the Malaysian Institute of Economic Research (MIER) predicted GDP to slow by -4.2% this year, downgrading earlier forecasts of -2.2%. The MEIR based its expectations on weak business and consumer sentiment.

There are signs, however, that positive sentiment is returning, with a study by independent market research agency InsightAsia Research in mid-July showing that Malaysia’s consumer confidence index had risen to 94 in the second quarter, not far short of the neutral level of 100 and well up from 83 in the first three months of 2009.

Combined with this is data from Malaysian Resources Corporation (MRCB) showing that new-build construction levels in Malaysia are currently on the rise, in part assisted by lower materials costs. Since peaking at $1105 last year, steel prices have fallen by 50%.

“We can definitely look forward to better times, especially with cheaper materials prices now,” MRCB’s group managing director, Shahril Ridza Ridzuan, told theMalaysian Star on July 13.

Lower costs and growing confidence will both support the recovery in the construction sector, giving investors more incentive to commit to new projects.

Along with the larger projects, government funding is also being directed towards smaller developments, such as upgrading local roads and services, constructing new schools, health centres and state buildings, and improving communications infrastructure.

It is not just state funding that is priming the construction industry’s pump. The sector was also bolstered by the news in mid-July that Merapoh Resources Corporation had found investors willing to put up the money for a $10bn crude oil refinery facility in the Yan district in the state of Kedah.

While much of the work has been contracted to South Korea‘s SK Engineering and Construction Company, Malaysian firms are expected to benefit from subcontracting projects and through supplying materials, with Merapoh saying it would give 30% of its project’s contracts to local companies. The project is set to have an immediate impact, with work due to start shortly and with the refinery and supporting infrastructure scheduled to be completed by 2014 at the latest.

Funding apart, the construction industry should also benefit from the government’s programme of economic reforms, which have included liberalising the services and opening the financial sectors to higher levels of foreign involvement, both through investment and employment of overseas personnel.

The government has also changed the regulations dealing with foreigners acquiring property, removing the requirement for state approval for transactions involving a dilution of bumiputra, the Malaysian term for ethnic Malays, or government interests for properties valued at $5.6m and above.

Additionally, sales of commercial property and industrial land worth more than $140,000 to overseas buyers will not require approval, though from January 1, 2010, the minimum threshold of residential units that can be sold to foreigners will be doubled from the current $70,000 to $140,000.

All these measures could act as a stimulus in the residential and commercial property markets, in turn driving demand in the construction industry. Unlike the more immediate effects of the government’s spending programme, any surge in building spurred by the reform package could take longer to make itself felt.

Malaysia’s construction industry is again on the move, with its shorter- and medium-term prospects far brighter than they were six months ago.

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