A week in tech, July 9-15

A roundup of the latest technology news.

ò Japan will stop pushing for legislation to charge royalties on the sales of iPods and other portable digital music players, giving in to opposition from electronics makers. What is being dubbed here as ôthe iPod taxö has been tossed around for years. The tax would allow about 1% to 3% of the price of a digital recording device to go to recording companies, songwriters and artists. The Agency for Cultural Affairs had hoped to submit legislation to Parliament as early as this fall. But amid a flurry of criticism from electronics makers, a meeting of a panel studying the proposal failed to reach any agreement. The cultural agency proposed a compromise in May to charge only portable digital music players, such as Apple Inc.'s iPods, and digital hard disk recorders.

ò DoCoMo will launch its BlackBerry service this August, targeting individuals, as well as small to midsize businesses. The BlackBerry 8707h will be sold through its own online shops and DoCoMo's corporate business partners. The BlackBerry internet service will cost Ñ3,045 ($28.40) per month tax included. A discount packet-billing plan to be launched on September 1, called the BlackBerry data transmission package, will enable users to transmit up to 80,000 packets of data per month for a flat charge of Ñ1,680.

ò Tokyo Electron said orders fell 35 percent in the fiscal first quarter because an oversupply of computer memory forced chipmakers to postpone spending plans. Orders for equipment used to make chips and flat panels declined to Ñ104 billion ($973 million) in the three months ended June 30, from Ñ159.3 billion in the previous quarter. Japanese makers including Tokyo Electron and Advantest Corp. may see a 6.6% drop to a combined Ñ2.08 trillion for sales of gear used to make chips and flat panels this fiscal year. Tokyo Electron's orders have hit bottom and will begin to recover this quarter. Chipmaking equipment orders slid 27% to Ñ72 billion in the quarter.

Media, entertainment and gaming
ò Japanese videogame maker Square Enix Co. had launched its first game for Apple Inc's iPod, broadening its target hardware to the top-selling media player. Square Enix, known for such blockbuster titles as ôFinal Fantasyö and ôKingdom Heartsö, began offering the ôSong Summoner: The Unsung Heroesö roll-playing game this week in Apple's iTune store. The game goes for $4.99 in the US, Ç4.99 ($7.84) in Europe and Ñ600 ($5.60) in Japan. Unlike some iPod games, which are modified versions of mobile phone games, ôSong Summonerö was developed exclusively for iPod and is designed to take advantage of the machine's functionality. A game player picks a song stored in the iPod and the song determines the types and abilities of the fighters in the game, or ôTune Troopersö.


ò KT Corp. cut its 2008 earnings targets on its shrinking fixed-line business and would take action to counter competition, raising concerns of a price war in a sluggish market. KT had lowered its operating profit target by 20% to W1.2 trillion ($1.21 billion) from a previously stated goal of W1.5 trillion. The company also cut its earnings before interest, tax, depreciation and amortization (Ebitda) target to W3.3 trillion from W3.6 trillion, and slightly lowered its 2008 revenue target to W11.9 trillion. KT, which has about 90% of South Korea's fixed-line market and 44% of the country's broadband customers, has seen profits slide as it faces increasing competition from smaller rivals.

ò South Korea aims to lead the worldwide mobile industry in terms of market share within five years and increase cooperation with other Asian countries in developing next-generation technological standards. The Ministry of Knowledge Economy aims to sell around 600 million mobile handsets and post $70 billion in exports annually by 2012. Currently, South Korea is in second place in the global mobile industry after producing 250 million mobile phones and exporting $29 billion worth of handsets last year. South Korea is home to Samsung Electronics and LG Electronics, the world's second and fourth-largest mobile phone makers. The industry has been undergoing an upheaval with efforts on technological convergence taking place across the world.

ò Yingli Green Energy announced that it has entered into five new sales contracts to supply an aggregate of more than 7 MW of PV modules to five companies in Korea. All modules will be used in projects located in Korea. Customers that signed these contracts include LG CNS Co., DMS Co., Hyosung Corporation, Nam Jung Energy Co., and Kaycom Corp, to which Yingli Green Energy will supply PV modules during the third quarter of 2008.

ò LG Display Co. raised production-spending plans this year by 50%, defying an industry glut that JPMorgan Chase and Lehman Brothers say may extend to next year. LG Display also forecast third- quarter profitability will fall more than analysts estimated. LG Display plans to invest about W1.4 trillion ($1.4 billion), part of its W4.5 trillion spending plan for the year, to build a production line for monitor and notebook LCDs that is scheduled to start output in the second quarter. The company will also begin operating a bigger eighth-generation plant in the first half of 2009.

ò LG Electronics Co. said its global touch-screen phone sales surpassed the 7 million unit mark recently. Sales in terms of units of the South Korean company's 11 models of touch-screen phones reached the mark at the end of June for the first time since LG introduced the ôPradaö model, a joint effort between LG and Italian fashion company Prada, in March 2007. The company sold some 2 million units of its ôViewtyö handset, with a built-in 5-megapixel camera, around the world, followed by 1.6 million units and 1.3 million units of its ôVenusö and ôVoyagerö models, respectively. Strong sales of the relatively high-priced models were attributed mostly to boosted recognition of the LG brand in the European and North American markets.


ò Macquarie Group and Seek agreed to invest a combined $105 million in Zhaopin , owner of China's third-biggest recruitment Web site, to capitalize on a market where sales have almost doubled in the past two years. Australia's biggest investment bank will buy 29% of the Beijing-based company for $60 million and Seek will pay $45 million to raise its stake to 43%. The sale will help unlisted Zhaopin hire workers in smaller Chinese cities, where the demand is growing faster than in major municipalities such as Beijing and Shanghai. Online recruitment in China generated Rmb277 million ($40.4 million) in sales during the first quarter, almost double from two years earlier.

ò Alibaba Group will invest Rmb2 billion ($293 million) over the next five years in wholly owned Taobao.com, China's leading online auction site by transaction value. The investment will be spent on technological innovation and attracting new employees. Alibaba Group has invested a total of Rmb1.45 billion in Taobao since it was established in 2003. Alibaba Group expects Taobao's transactions to total Rmb100 billion this year.

ò Around one million iPhones have been unlocked and brought into China and are running on China Mobile's network. According to In-Stat China, the number of unlocked iPhones potentially in use in China has more than doubled in the last six months (from around 400,000 in December 2007), a figure that does not include iPhones running on rival China Unicom's network. Apple had shipped 5.4 million iPhones globally by the end of first-quarter 2008, which means the one million devices could account for a sizable proportion of all iPhones in circulation. Negotiations between China Mobile and Apple over an official launch of the iPhone reportedly broke down over Apple's insistence on securing a portion of China Mobile's iPhone revenue.

ò DoCoMo has established DoCoMo China, as a wholly owned subsidiary in Shanghai, China. DoCoMo China will focus mainly on providing mobile solutions for corporate customers, especially locally based Japanese companies. The office is expected to begin operating from the end of July, once the necessary governmental and commercial approvals have been obtained.

ò ChinaÆs CDMA subscribers had exceeded 43 million by the end of the first quarter this year. It is predicted that by 2011, global CDMA subscribers will surge to 720 million, with a compound annual growth rate of 13.8%. At present, the Middle East and Africa remain the most valuable areas to be tapped. The increase in the number of subscribers ushers in the prosperity of CDMA equipment manufacturers, and ZTE, Alcatel-Lucent, Huawei, Nortel and Motorola all become big gainers in the world network equipment market.

ò Nokia Siemens Networks is to power China Mobile's expansion drive, signing a Ç550 million ($874.4 million) network expansion frame agreement. Under the contract, Nokia Siemens Networks, a joint venture between Finland's Nokia Corp. and Germany's Siemens AG, will build the radio and core network for China Mobile, in provinces and cities across China. The deal represents the strengthening of our position as a leading solution provider to China Mobile. The deal has strategic importance as it may help pave the way for larger 3G orders in China later on.

ò China's telecoms reshuffle unlikely to deter Korean operator from participating in market, but could make its plan to offer mobile services there difficult. SK Telecom Co. may have to reevaluate its expansion strategy in China's fast-growing telecommunications market following a telecom sector revamp in the mainland. While the South Korean mobile carrier isn't likely to withdraw from China altogether, the company may find it increasingly difficult to raise its stake in local operators due to stiffer competition from foreign telecom firms and China's policy of preventing significant foreign influence in its telecoms sector. Facing slow revenue growth at home, with more than eight out of every 10 people carrying a cellphone, SK Telecom, with a market capitalisation of W15.5 trillion ($14.8 billion), has been looking to expand overseas. SK Telecom has helped China Unicom run its code division multiple access network for a second-generation wireless service.

ò Pacnet set up a joint venture with China-based firm Zhong Ren Telecom, to offer internet protocol services to Chinese companies and expand its presence in the country. Pacnet and Zhong Ren Telecom will each hold a 50% stake in the joint venture. The two firms did not disclose financial details. Pacnet, formed from China Netcom's former Asia Netcom unit and Singapore internet services provider Pacific internet, teamed up with a group of companies including Google and SingTel in February to build a trans-Pacific undersea cable.

ò BT Group plans to expand its workforce on the mainland by 10% to 15%within a year to meet increasing demand from the banking and logistic sectors. On the mainland, the company's customers include Industrial and Commercial Bank of China, Bank of Communications, Air China Logistics and China Shipping Container Lines. Multinational customers include Reuters, Nestle and PepsiCo. China Netcom and China Telecom provide BT with network support in the country while Huawei Technologies and ZTE Corp supply hardware to the company.

ò China Telecom has appointed Shang Bing as president and chief operating officer of the company, replacing Leng Rongquan who resigned from his posts. The mainland telecom operator did not give any reason for Leng's resignation. Shang Bing, a 52-year-old senior economist, is currently a vice president of China Telecommunications Corp, the controlling shareholder of the listed company. China Telecom also appointed Yang Xiaowei as an executive vice president of the company. Yang, a 44-year-old senior engineer, is also a vice president at China Telecommunications Corp.

ò Huawei Technologies said its profit rose 32% in 2007 on increased orders from clients such as Vodafone Group and China Mobile. Net income climbed to $674 million, from $512 million in 2006. Sales rose 48% to $12.6 billion. The company had sales of $12.6 billion in 2007, up from $8.5 billion a year earlier. The company realised global contract sales of $16 billion in 2007, up 45% year-on-year. International markets accounted for 72% of revenue. Huawei has achieved a growth rate of over 150% in developed markets, such as Europe, the US and Japan, while managing strong growth in emerging markets, including the Asia-Pacific, Latin America, the Middle East and North Africa. In mobile networks, Huawei won 45% of all new UMTS/HSPA contracts in 2007, making it a top-three supplier for GSM globally.

ò ZTE CorporationÆs global sales of mobile phones will leap 61% to 50 million units this year. The company grew into the world's sixth largest mobile phone maker following Nokia, Motorola, Samsung, LG, and Sony Ericsson in 2007, but it gained only 1.3% growth in its mobile phone revenues in the first quarter of this year. ZTE will seek booming growth in the coming two years thanks to China's telecom industry regrouping and the to-be-expanded TD-SCDMA networks. The company will gain Rmb11 billion ($2 billion) revenues from the telecom industry regrouping in 2009 because China Telecom and China Unicom will spend more money on network upgrading. Moreover, if the third-generation mobile license is granted, it will obtain Rmb6 billion revenues at least next year thanks to the 3G infrastructure construction.

ò China Telecom sets a strategic goal to lift the number of CDMA subscribers to 100 million in 2009, rivaling its peer China Mobile. China Telecom, which is taking steps to achieve the goal, have mapped out a plan to set up a mobile business operation that is said to be under the charge of Yang Xiaowei, deputy general manager for China Telecom. The telecoms operator has already nominated management executives for all the divisions under its newly formed operation except the terminal customising unit. In a bid to come up with the demand for CDMA terminals, China Telecom earlier set up a terminal customizing unit engaged in customization, procurement and distribution of mobile devices.

ò Sales outlets of China Netcom began accepting GSM mobile telecom business of China Unicom in Beijing. However, it is still pending when China Unicom is able to carry out businesses of China Netcom. Insiders from China Netcom say that China Netcom's Beijing branch is not alone as China Netcom has started to accept businesses of China Unicom in many cities around the country. Even before the completion of the merger, China Unicom and China Netcom had sent employees to each other for trainings.

ò ChinaTel Group has completed the installation of the first phase of an internet wireless network in Beijing. The wireless network is live and provides internet access services across approximately 100 sq km of metropolitan Beijing. Wireless broadband services will be provided on the 3.5GHz radio frequency spectrum that the Chinese government has granted use to Chinacomm for its WiMAX broadband services.

Media, entertainment and gaming
ò Perfect World announced that ôZhu Xianö was launched in Taiwan through Game Flier International Corp, a subsidiary of Soft-World International Corp on June 30, 2008. ôZhu Xian,ö an online game developed based on a popular Internet novel with the same name, has been well-received by domestic online game players since its launch in China in 2007. Licensing agreements for exporting the game to nine countries and regions including Taiwan have been signed so far.

ò The9 announced that it would soon kick off inner beta test on Audition2. The Chinese cyber game vendor was licensed the exclusive operation right in May last year from South Korea-based game developer G10 Entertainment under a cooperative agreement. Audition2 is the upgraded version of Audition. It is an online 3D leisure dancing competition cyber game, with unbeatable music experience. The game recorded 780,000 game players simultaneously at maximum. Based on its predecessor, Audition2 has added new features and online community-oriented functions. Chen Xiaowei, president of The9, says that lately it joined hands with South Korean game vendor T3 to set up a joint venture to run and manage a series of cyber games including Audition2. The partnership with T3 deepens the cooperation between the two companies in cyber game development and localization.

ò Lenovo Group will see sales growth in its core domestic market slip in its fiscal first quarter, weighed down by the impact of the Sichuan earthquake. Add that to lingering slow demand in North America, the company could see lower than forecast global shipments and revenue in the quarter to June. Lenovo's personal computer shipment growth on the mainland was 15% in the quarter to June, down from 24% in the quarter to March. Lenovo's Greater China sales geography makes up its largest market worldwide. It accounted for 34.5% of the company's revenue in its fiscal fourth quarter to March, while its Americas geographical market contributed 27.5%. Sichuan accounted for 3% of total personal computer shipments on the mainland.

ò Chunghwa Telecom Co. Ltd. had a parent-level net profit of NT$4.64 billion ($153 million) in June, up from NT$3.80 billion posted in May. Parent sales during the month fell to NT$15.73 billion from NT$15.87 billion a year earlier. There was a cumulative net profit of NT$23.32 billion, or NT$2.40 per share, in the first six months of the year, without giving comparative figures. The first-half EPS attained 53.7% of its full-year forecast. Six-month parent sales increased to NT$93.37 billion from NT$92.33 billion.

ò Delta Electronics announced that its consolidated sales revenues for June 2008. Sales totaled NT$12.1 billion ($399.3 million), representing a 13% increase as compared to NT$10.7 billion for June 2007 and a 1% decrease as compared to NT$12.3 million for May 2008. The Company's cumulative consolidated sales revenues from January to June in 2008 were NT$69.7 billion, a 19% increase as compared to NT$58.6 billion for the same period last year.

ò Hon Hai Precision Industry posted its slowest monthly sales growth in 19 months. Hon Hai, which makes games consoles for Sony Corp. and iPhones for Apple, posted a 14% increase in June sales to NT$107 billion ($3.5 billion), the smallest increase in monthly sales since December 2006.

ò Nanya Technology Corp has raised contract manufacturing prices for dynamic random access memory (DRAM) chips for the first half of July by 5% from June second-half levels. The price increase came amid a loss suffered by the DRAM operations. But the magnitude of price increase was limited by still high inventories at computer contract makers.
Information Technology

ò Revenue of Taiwan's information technology (IT) service market reached $1.88 billion in 2007, up 2.7% from previous year. In the second half of 2007, IT service revenue in Taiwan was $961 million, up 3.7% from the same period of previous year. IDC Taiwan, the local branch of the premier global provider of market intelligence and advisory services, pointed out that three major IT service engagement types account for the greatest market share, including technology-product services. The top-five IT service providers in Taiwan are IBM Global Services (accounting for 11.9% of total revenue), HP (6.3% ), Systex Corp. (4.1%), Chunghwa Telecom (2.7%), and Mitac (2.5%). Some IT service providers that rely much on governmental bidding projects would benefit from the governmentÆs approval of some budgets for the projects in the second half of 2007.

Hong Kong

ò PCCW, Hong Kong's biggest phone carrier, may pay its highest rates to borrow $3 billion in loans for a new unit that will hold the company's main assets, said people familiar with the deal who declined to be identified because the information isn't public. HKT Group Holdings may need to pay between 175bp and 250bp above the benchmark lending rate for the five-year part of the loans. PCCW-HKT Telephone's 6% $500 million bonds maturing in 2013 traded at 308bp above US Treasuries on July 11, up 8bp from the end of June, according to BNP Paribas's prices. Banks, saddled with at least $409.9 billion of writedowns and losses since the beginning of last year from the collapse of the subprime-mortgage market, are demanding higher interest charges from even their top investment-grade clients, as they seek to preserve capital and limit risk. PCCW said on June 27 it plans to use proceeds from the sale of a stake in HKT Group to repay debt at PCCW and PCCW-HKT Telephone, before new investment-grade rated debt is raised at HKT Group. PCCW-HKT Telephone, which provides local and international telephony, local data and broadband services, is rated BBB by Standard & Poor's and Baa2 by Moody's Investors Service. Both ratings are the second-lowest investment grade.

ò Hong KongÆs PCCW expects to shortlist bidders for a 45% stake in a newly formed telecoms, media and IT unit HKT Group Holdings within a month, after receiving an estimated eight expressions of interest from potential buyers including private equity firms, Reuters reports. The stake is expected to be worth upwards of US$2.5 billion. PCCWÆs managing director Alex Arena told reporters that some of the interested companies had broadband television investments in Taiwan and South Korea, but did not name any private equity groups. TPG Capital, Macquarie Group, Blackstone Group, Providence Equity Partners, Kohlberg Kravis Roberts and MBK partners are believed to be amongst the interested parties. The auction is being managed by UBS. TPG and Macquarie were the main contenders for PCCW's assets two years ago, in what was mooted to be a $7 billion deal before the Chinese government intervened.

ò Hutchison Whampoa denied an Italian newspaper report that Egyptian billionaire Naguib Sawiris had offered to buy its struggling 3 Italia telecoms unit for close to Ç4 billion ($6.3 billion). Sawiris, who owns Italian mobile phone operator Wind, wanted to expand his empire. But Hutchison said the report was incorrect. The newspaper added that Sawiris had proposed a deal to Hutchison owner and Hong Kong billionaire Li Ka-shing, who thought Sawiris' initial offer too low and who now appeared to be seeking another Ç1 billion on top of that. Sawiris, who also chairs Egypt-based mobile operator Orascom Telecom , had engaged Credit Suisse to advise him on a deal.


ò AT&T is close to buying Malaysia's Maxis Communications' 74% stake in Indian mobile operator Aircel. AT&T, which is seeking to re-enter the cellular market, has valued Aircel at $5 billion-$6 billion. Maxis, Malaysia's top mobile services firm, holds 74% in Aircel, the maximum permissible by Indian law, with the remainder held by India's Apollo Hospitals Enterprises. Aircel has 7,000 telecom towers and nearly 11 million subscribers in India. AT&T, which has applied for licences in India in partnership with the Mahindra Group, was reported last year to be eyeing a wireless acquisition in the fast-growing market.

ò Malaysia's TM International and Indian mobile operator Idea Cellular will launch an open offer on August 22 to buy up to 20% of Spice Communications. The mandatory offer follows a three-way deal struck to acquire Spice by Idea Cellular, India's fifth-largest mobile operator. Under the deal, TM International's 39.2% stake in Spice will be converted into Idea shares. TM, which is a unit of Telekom Malaysia, will also pay for a preferential allotment that will give it around a fifth of Idea.

ò South Africa's MTN and India's Reliance Communications may continue their tie-up talks beyond the deadline. MTN and Reliance agreed in May to 45 days of exclusive negotiations to create a global top 10 telecoms company. An extension would give Reliance Communications' chairman Anil Ambani some time to try to resolve a claim of right of first refusal on the telecom's shares by his estranged brother Mukesh, who runs Reliance Industries, India's largest company. MTN, sub-Saharan Africa's top mobile operator, is nervous about entering a deal with a legal cloud over it and has looked at ways to restructure a transaction. The discussions had initially focused on a takeover of Reliance by MTN, but now the companies are weighing the reverse, a takeover of MTN by Reliance.

ò Philippine Long Distance Telephone (PLDT), added more than 1.6 million mobile phone subscribers in the second quarter, beating its 1.5 million target. PLDT expected rising fuel and food costs as well as a volatile peso to weigh on sales, trimming its revenues and core net profit this year. PLDT has set core earnings guidance of Ps37 billion this year, up 5% from 2007. In the first quarter, PLDT's core net profit climbed 11% to Ps9.3 billion ($203 million).

ò Connectivity Unlimited Resource Enterprise (CURE) is expecting an additional 60,000 to 70,000 customers to subscribe to its latest service, uMobile, by the end of this year. Around 5,000 to 10,000 people had subscribed to this service within the first month of its commencement. The move comes against a backdrop of rising mobile subscribers in Philippines. BMI estimates that there will be 62.5 million mobile subscribers in 2008, with the total rising 13% by 2012 to 75.14 million. Over this period, penetration will rise from 69.7% to 78%.

ò Ayala has sold a part of its stake in Globe Telecom to its partner SingTel for Ps4.6 billion ($101 million). The capital raised through this sale will be invested by Ayala in Integrated Microelectronics (IMI), its Business Process Outsourcing (BPO) and electronic manufacturing service subsidiary. This move by Ayala has been in part due to anxiety over IMI's planned Initial Public Offering (IPO) and listing during a period of unstable financial markets. The move comes against a backdrop of rising mobile subscribers in Philippines.

ò Vodafone could be forced to pay more than $4 billion if it loses its court case relating to tax claims by the Indian government over its Hutchison Essar acquisition, reports the Financial Times. India is trying to levy $2 billion of capital gains tax on Vodafone's 2007 $11 billion acquisition of Hutchison Essar, despite Vodafone being the buyer and not the seller of the asset, on the grounds it should have withheld the tax on behalf of the government. Vodafone argues that the transaction is not taxable because the deal itself took place overseas. The government can award a penalty which would bring the final sum payable by the operator to over $4 billion. Vodafone opposes the amendment on the grounds that India's constitution forbids imposing such penalties retrospectively. Both sides concluded their arguments in the Bombay High Court, and a verdict is expected in the next few weeks.

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