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Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
Svc Wireless Final
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Svc Wireless Final

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  • 1. Jefferies & Company, Inc. Wireless Investing – A Wall Street Perspective SVC Wireless Technology Association June 24, 2006 CONFIDENTIAL DRAFT
  • 2. The Global Investment Bank Of Choice For Growth Companies <ul><li>A leading institutional brokerage and investment banking firm – led by one of the most powerful capital markets trading platforms in the industry </li></ul><ul><li>The Leading Sales and Trading platform for NASDAQ stocks </li></ul><ul><li>#1 High Yield underwriter (under $150 million) </li></ul><ul><li>Leading emerging growth equity research </li></ul><ul><li>Most rapidly growing full service investment bank on Wall Street </li></ul><ul><li>Technology Group of Jefferies with over 90 tech bankers </li></ul><ul><li>Highly differentiated approach to the market with dedicated sector teams globally focused on full-service relationship banking </li></ul><ul><li>Jefferies Broadview is the M&A platform of choice in technology </li></ul><ul><ul><li>Since 1998 Jefferies Broadview has advised on 440 technology transactions globally worth approximately $67.3 billion </li></ul></ul>Technology Group (Jefferies Broadview) Jefferies <ul><li>Wall Street Journal, March 2004. </li></ul><ul><li>Market Capitalization as of May 10, 2006. </li></ul><ul><li>Revenue represents FY2005 ending December 31, 2005. </li></ul>Austin San Francisco Los Angeles Dallas Houston New Orleans Chicago Nashville Atlanta Richmond Boston Stamford New York Jersey City Washington London Paris Zurich Tokyo Sydney** Melbourne** Silicon Valley Israel* Waltham Hong Kong* Shanghai New Delhi <ul><li>Publicly-held (NYSE:JEF) </li></ul><ul><li>The #1 performing stock price of investment banks over the past 10 years (1) </li></ul><ul><li>$4.0 billion market capitalization (2) </li></ul><ul><li>$1.5 billion in annual revenue (3) </li></ul><ul><li>Over 2,000 employees in 27 offices worldwide </li></ul><ul><li>50%+ Employee Owned </li></ul>Cities in red indicate Jefferies Broadview locations, * Affiliates $0 $10 $20 $30 $40 $50 $60 4/22/99 11/22/99 6/22/00 1/22/01 8/22/01 3/22/02 10/22/02 5/22/03 12/22/03 7/22/04 2/22/05 9/22/05 3/20/06 1 Investment Dealers Digest 2005 Middle Market Bank of the Year
  • 3. Jefferies Delivers The Full Spectrum Of Products And Services To Technology Clients <ul><li>Investment Banking </li></ul><ul><li>Leading banking franchise focused on high growth companies with over 400 Investment Bankers (nearly 100 in technology) in over 20 offices worldwide </li></ul><ul><li>Equity Offerings – Completed over 230 IPO and Follow-on offerings, raising over $40B since 2000 </li></ul><ul><li>M&A – Ranked #1 in technology M&A advisory assignments in 2006YTD, 2005 and 2004 (1) </li></ul><ul><li>Private Equity - Regular dialogue and relationships with over 250 financial sponsors </li></ul><ul><li>Restructuring - Restructured approximately $150 billion in securities and liabilities </li></ul><ul><li>Equity </li></ul><ul><li>Over 135 account executives cover over 2,200 institutional accounts; make markets in over 4,000 stocks </li></ul><ul><li>#2 YTD volume trader of NASDAQ and OTC stocks; #3 trader in 2005 (2) ; handle over 10% of NYSE volume; top 5 trader in nearly 2,000 NASDAQ stocks </li></ul><ul><li>Over 100 research analysts covering over 700 companies </li></ul><ul><li>Debt </li></ul><ul><li>Dedicated high yield team of over 40 experienced senior professionals </li></ul><ul><li>Integrated sales, trading, research, capital markets and banking functions </li></ul><ul><li>#1 underwriter of mid-cap high yield debt (3) ; led by team that joined Jefferies Broadview from Drexel Burnham Lambert </li></ul>Investment Banking Equity Asset Management Debt Cash Management Capital Partners High Yield Private Placements Structured Finance Trading Sales Research Capital Markets Industry Coverage Mergers and Acquisitions Financial Sponsors Restructuring Private Client Services Offers A Full Suite Of Investment Banking Products And Services To Serve High Growth Companies Throughout The Corporate Lifecycle (1) Source: SDC, 1/1/2005 - 12/31/2005. (2) Source: Autex, 1/1/2005 - 12/31/2005 (2005), 1/1/2006 – 5/19/2006 (YTD). (3) Source: SDC, 1/1/2005 - 12/31/2005. <ul><li>Asset Management </li></ul><ul><li>Private Client Services / Cash Management – advisory, portfolio management and customized financial solutions </li></ul><ul><li>Jefferies Capital Partners - more than $685 million in private equity funds under management </li></ul>2
  • 4. Considerable Asian Investment Banking Experience Japan Korea * Transaction completed by team at previous employer Greater China $106,000,000 Initial Public Offering Co-Manager has completed a Series C Round of Financing $37,000,000 has divested its broadcasting equipment subsidiary TV/COM International, Inc., to Confidential Confidential has been acquired by HK$ 882,000,000 Management 速达软件 Superdata Software 速达软件 Superdata Software India has been delisted from the Hong Kong GEM in a management-led buyout sponsored by Initial Public Offering Co-Manager Initial Public Offering Co-Manager Initial Public Offering Co-Manager Sole Placement Agent $13,000,000 Ambow Education has sold a minority stake to $50,000,000 Convertible Notes Offering Sole Manager $160,000,000 has been acquired by 3 CHF80,000,000 Co-Manager Initial Public Offering Joint Book Runner $1,803,000,000 SMIC * $62,000,000 has been acquired by $80,600,000 Initial Public Offering Co-Manager China Finance Online Co. Limited $165,100,000 has divested its Handset Division to has divested certain manufacturing assets to Confidential formerly the graphics unit of Confidential has restructured its Digital Media Business and Merged its Graphics Business with Initial Public Offering Sole Book Runner $92,479,037 * Silicon Motion Initial Public Offering Lead Book Runner $71,454,555 * $30,000,000 has sold certain mobile computing assets to Pequot Capital National Semiconductor Pericom Semiconductor and other investors Och - Ziff Capital has agreed to be acquired by Financial Advisor to the Seller $324,000,000 Access Co. Ltd. Confidential has been acquired by has been acquired by $90,000,000 Financial Advisor to the Seller has been acquired by Confidential Confidential has made a minority investment in Uniccs Co. Ltd. has sold a minority interest to Confidential Confidential has sold a minority stake to $450,000,000 has acquired $38,000,000 has acquired has been acquired by Softbank Kingston Technology Corporation Confidential has been acquired by Softbank $30,000,000 has made a minority investment in SunUp Design Systems, Inc. Electronics Inc. Confidential $34,500,000 Convertible Bond Placement Sole Manager $28,750,000 Convertible Notes Offering Sole Manager $32,200,000 Convertible Notes Offering Sole Manager $38,000,000 Co-Manager $50,000,000 Co-Manager $34,500,000 Convertible Bond Placement Sole Manager $139,800,000 Initial Public Offering (ADS) Co-Manager $80,500,000 Convertible Bond Placement Sole Manager $45,000,000 Convertible Notes Offering Sole Manager Nahar Industrial Enterprises Ltd. $33,000,000 Convertible Notes Offering Sole Manager The Simbhaoli Sugar Mills Limited $50,000,000 Convertible Notes Offering Sole Manager $160,813,125 Initial Public Offering Co-Manager $30,000,000 Convertible Notes Offering Sole Manager ¥11.3 billion $100,000,000 Convertible Notes Offering International Financial Advisor
  • 5. Representative Asian Investment Banking Services <ul><ul><li>Mergers & Acquisitions Advisory </li></ul></ul><ul><ul><ul><li>Buy-side or sell-side cross border M&A advisory </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Japan: PalmSource/Access, Airborne/Cybird, Zingy/For-Side </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>China: Ross Systems/CDC, Audiovox/UT Starcom </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Korea: Integrant/ADI </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Private equity/hedge fund sponsored buyouts </li></ul></ul></ul><ul><ul><ul><ul><li>Example: Superdata Software delisting from HK stock market </li></ul></ul></ul></ul><ul><ul><li>Equity, Equity-Linked and Debt Financings </li></ul></ul><ul><ul><ul><li>IPO listings: U.S. NYSE/NASDAQ, London AIM/Euronext, Japan Mothers </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>China: China Finance Online (U.S.), Ninetowns (U.S.) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Japan: Gung Ho (Japan), Cybird (Japan) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>India: Patni (India & U.S.) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Convertible financings </li></ul></ul></ul><ul><ul><ul><ul><li>Examples: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>India: HEG (Euro), GHCL (Euro), Bilcare (Euro) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>High yield and bank debt financing </li></ul></ul></ul>Jefferies provides Asian clients with the same broad range of investment banking services offered to U.S. and European clients 4
  • 6. Mobile Media Industry Overview 5
  • 7. Robust Subscriber Fundamentals Continue To Drive The Wireless Market Forward… <ul><li>Source: IDC December 2004 </li></ul><ul><li>Source: Morgan Stanley </li></ul><ul><li>Source: Yankee Group 2005 </li></ul><ul><li>CAGR referes to total wireless data revenue growth. </li></ul>CAGR=7.4% Worldwide Service Revenue (USD Billions) (1) Global Wireless Subscribers (In Billions) (1) Data Revenue as a Percentage of North American Wireless Carrier Revenue (3),(4) Average Minutes of Use (MOU) (2) CAGR=8.8% 0% 5% 10% 15% 20% CAGR=51.2% 6.3 8.6 11.4 14.0 16.5 CAGR=2.4% 6 2004 2005 2006 2007 2008
  • 8. … And Investments Are Plowing Into The Mobile Entertainment Market, A Multi-Billion Dollar Opportunity!! Global mobile entertainment revenues ( $ million) CAGR 32.6% Source: Juniper Research Limited, &quot;Mobile Entertainment Content Series,&quot; 2nd Edition, February 2005 <ul><li>Growth Drivers: </li></ul><ul><li>Pricing decreases for devices with mobile media capabilities will accelerate mass-market growth. </li></ul><ul><li>Carriers seek to provide innovative content in order to reverse declining ARPU trends. </li></ul><ul><li>Next-generation networks will gain predominance in the near future. </li></ul><ul><li>Carriers will continue to develop mobile payment plans such as “mobile wallets” and “virtual lockers”. </li></ul>7
  • 9. Globally, All Key Players Are Actively Addressing The Multimedia Content Space And Convergence Has Begun… <ul><li>Entertainment and Media </li></ul><ul><li>Key Strategies: </li></ul><ul><li>Leverage content portfolio into mobile space </li></ul><ul><li>Drive licensing relationships between developers and publishers towards providing rich, interactive mobile media </li></ul><ul><li>Infrastructure </li></ul><ul><li>Key Strategies: </li></ul><ul><li>Create enabling end-to-end solutions </li></ul><ul><li>Allow carriers to use multimedia apps for differentiation </li></ul><ul><li>Push multimedia applications to drive high-end devices/advanced network solutions </li></ul><ul><li>Mobile Carriers </li></ul><ul><li>Key Strategies: </li></ul><ul><li>Leverage multimedia applications to drive ARPU and data usage rates </li></ul><ul><li>Maintain customer relationship </li></ul><ul><li>Interactive Media </li></ul><ul><li>Key Strategies: </li></ul><ul><li>Aggregate/leverage content into mobile channel </li></ul><ul><li>Partner to deliver email, messaging, ring tones, games, etc. </li></ul>8
  • 10. … But In China, the Wireless Value-Added Service Market Has Already Converged And Is Growing Rapidly… <ul><ul><li>Rapid Growth From Virtually Zero to $1BN+ in Under 4 Years </li></ul></ul><ul><ul><ul><li>Currently accounts for approx. 50% of China Internet revenue </li></ul></ul></ul><ul><ul><ul><li>300MM+ SMS messages in 2005 </li></ul></ul></ul><ul><ul><ul><li>WVAS expected to be $1.6 billion market in 2007 (1) </li></ul></ul></ul><ul><ul><li>Wired/Wireless Chinese Internet Has Demonstrated Crossover </li></ul></ul><ul><ul><li>Chinese WVAS Market Is Tremendously Competitive </li></ul></ul><ul><ul><ul><li>Over 4 pure-play NASDAQ listed WVAS and 2,000 SPs(2) </li></ul></ul></ul><ul><ul><li>Chinese Internet Market Landscape </li></ul></ul>China WVAS Market (1) 0 500 1,000 1,500 2,000 2,500 2004 2005E 2006E 2007E 2008E 2009E 2010E Sales (US$) <ul><li>Source: Jefferies and Street estimates. Does not include carrier revenue. </li></ul><ul><li>Source: China Mobile, April 2005 </li></ul>Wireless Media Wired Media Wireless Value Added Service Providers eCommerce Companies Online Ad Companies Online Game Providers <ul><li>China Wireless Market </li></ul><ul><li>Overview </li></ul><ul><li>Wireless subscribers outnumber wired subscribers </li></ul><ul><li>400MM+ mobile users (#1 globally) but only 30% penetration </li></ul><ul><li>100MM+ Internet users (#2 globally) but less than 10% penetration </li></ul>CAGR: 19% Wireless Operators 9
  • 11. … But Risks of Disintermediation and Operator Dependence Weigh Heavily on the Business Models of Typical WVAS CPs And SPs… Risk 1a: Disintermediation Faced primarily by SPs who risk being squeezed out of the equation by both CPs and mobile operators Risk 1b: Too Far from End-User As goal for CPs should be to capture more of the value chain by getting closer to their customers, middlemen risk being cut out as CPs develop ways to go direct to the end-user Risk 2: Operator Dependence Faced by CPs and SPs alike in that mobile operators currently possess significant control over how content and applications are marketed, distributed, and paid for Generic / Shared Content Channels CP 2 World Wide Web Consumers Risk 1a: Disintermediation Risk 2: Operator Dependence Risk 1b: Too Far from End-User SP 1 CP n CP 1 SP 2 400MM+ mobile; 100MM+ desktop e.g., Mobile Operators, Desktop, IPTV, Cable, etc. e.g., SINA, Namco, Gamevil…and hundreds of thousands of companies e.g., KongZhong, Tom Online, Linktone, Hurray!...and 2,000 other SPs! 10
  • 12. …As Evidenced By Recent Mobile Operator Moves <ul><ul><li>Chinese Operators Aren’t Ignorant! </li></ul></ul><ul><ul><ul><li>Won’t make the same mistakes of their U.S. / European counterparts </li></ul></ul></ul><ul><ul><ul><li>Likely to capture as much of the value chain as possible </li></ul></ul></ul><ul><ul><li>Market Will Continue To See Volatile Operator Policy Changes </li></ul></ul><ul><ul><ul><li>China Mobile recently imposed policy changes in 2006 </li></ul></ul></ul><ul><ul><ul><ul><li>Double confirmation for SMS, IVR, WAP before payment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>No subscriptions and charging for message  move to fixed month fees </li></ul></ul></ul></ul><ul><ul><ul><ul><li>No renewal of provincial licenses regarding Instant Messaging (Tencent, Netease, Sina, Tom) </li></ul></ul></ul></ul><ul><ul><li>Chinese WVAS Providers Have Substantial Disintermediation Risk </li></ul></ul><ul><ul><ul><li>Dependent on operators for distribution and CPs for content </li></ul></ul></ul><ul><ul><li>3G Will Reshuffle The Deck </li></ul></ul><ul><ul><ul><li>Represents opportunity for Chinese to create hybrid voice/data companies similar to Asian counterparts (e.g., SK Telecom - Korea, NTT Docomo - Japan) </li></ul></ul></ul>11
  • 13. Strategic Observations <ul><ul><li>Market is Huge…But Supremely Competitive </li></ul></ul><ul><ul><ul><li>Dynamics will likely be repeated in other sectors of China Internet </li></ul></ul></ul><ul><ul><ul><li>No free lunch! </li></ul></ul></ul><ul><ul><li>Industry Growth Potential Relies More on Up-Sell </li></ul></ul><ul><ul><ul><li>Highways are built and now is time to monetize traffic </li></ul></ul></ul><ul><ul><li>Disintermediation Will Occur Rapidly </li></ul></ul><ul><ul><ul><li>3G upgrade will reshuffle the deck </li></ul></ul></ul><ul><ul><ul><li>Public company pressures on operators and competitive forces will likely drive consolidation faster than in the U.S. </li></ul></ul></ul><ul><ul><li>Where Is the Smart Money Going? </li></ul></ul><ul><ul><ul><li>Operators </li></ul></ul></ul><ul><ul><ul><li>Out-of-Network Distribution Channels (e.g., TV, Kiosks, Slim Devices) </li></ul></ul></ul><ul><ul><ul><li>Proprietary Content </li></ul></ul></ul><ul><ul><ul><li>Large Scale Distribution Platforms With Proprietary Content </li></ul></ul></ul>12
  • 14. Mobile Media Investment Overview 13
  • 15. Venture Investment In Chinese Companies Remains Hot Total VC Investment In Chinese Companies Since 2002 (US$millions) Source: Zero2IPO <ul><li>Key Trends </li></ul><ul><li>Technology continues to attract the most investment </li></ul><ul><li>Increase in average deal size </li></ul><ul><li>Money continues to flow into China but demand for quality investment opportunities not being met </li></ul>2005 was a record year in terms of VC money raised with over $4 billion raised to invest in China. 2006 is on pace to be another big year with $904 million raised in Q1 2006. $418 $992 $1,269 $1,173 $334 226 170 253 228 42 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2002 2003 2004 2005 Q1 2006 0 50 100 150 200 250 300 Total Invested Deal Count 14
  • 16. Foreign IPOs Outside of Mainland China Continue To Be Exit Of Choice For Chinese Companies Source: Thomson Financial, CapitalIQ; as of June 16, 2006. Dual listed companies listed by primary exchange. Other exchanges includes London AIM, Mothers, Kuala Lumpur, SG SESDAQ and TSXVenture. Total Number Of Chinese IPOs By Exchange Total Amount Raised Through Chinese IPOs By Exchange Hong Kong New York Nasdaq Singapore Shenzhen Shanghai HK GEM Other Avg. IPO Amt. Since 2000 $262 $1,896 $98 $21 $56 $79 $19 $31 (US$Millions) $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2000 2001 2002 2003 2004 2005 2006YTD 0 50 100 150 200 2000 2001 2002 2003 2004 2005 2006YTD 15
  • 17. But Recent End Of Yearlong Ban On Share Sales Marks Potential Return Of Domestic China IPO Activity Shanghai Stock Exchange IPO Volume 2004-2006YTD Shenzhen Stock Exchange IPO Volume 2004-2006YTD Shanghai and Shenzhen Stock Exchange Relative Performance Source: Thomson Financial, CapitalIQ; as of June 16, 2006 China CAMC Engineering’s $55mn IPO, the first since the moratorium was lifted in May, was 576x and 100x oversubscribed for the retail (80%) and institutional (20%) portions, respectively. Shares begin trading on June 19. The domestic markets in China have been on a rebound in 2006 but have given back some gains recently due to profit taking and concerns over liquidity as new IPOs flood the market Median IPO Proceeds Since 2004: $43mn Median IPO Proceeds Since 2004: $27mn 16
  • 18. Nasdaq Continues To Be The Listing Venue Of Choice For Technology Companies But Record Is Mixed Source: Thomson Financial, CapitalIQ; as of June 16, 2006 Chinese Technology Nasdaq IPOs Since 2004 (US$Millions) <ul><li>Key Observations: </li></ul><ul><li>YTD06 and FY05 issuances (8) approximately same as FY04 (9) </li></ul><ul><li>Although only 6 IPOs trading below IPO price, aftermarket performance tends to be binary </li></ul><ul><li>IPO Sectors: Software/Internet (11), Media (1), Semis (2), Telecom Equipment (1), Med Devices (1), EMS (1) </li></ul><ul><li>Absent Sectors: Financial Technology, Healthcare/Bio Technology, Education, etc. </li></ul>17
  • 19. The IPO Market For Wireless Enhanced Services Is Currently Being Led By Content & Applications (1,2) Recent technology IPO’s have had the following median financial metrics: - Revenue of $79 million - Revenue growth of 44% - EBIT Margin of 16% - 5 quarters of profitability <ul><li>Financial Data as of 6/16/2006. </li></ul><ul><li>Jamdat went public in 2004 but was acquired by EA in December 2005. </li></ul>Asian WVAS operators trade at discount to global comps due to lack of control 18 Raised $100.0m Date: 07/08/04 EMC: $347m Profitable Quarters before IPO: 5 Quarterly $11.9mm Revenue before IPO: %Change 0.1% Since IPO: TEV / TTM Rev 2.6x TEV / TTM EBITDA 7.9x TEV / 2006E Rev 2.0x TEV / 2006E EBITDA 7.8x Raised $70.5m Date: 02/04/05 EMC: $130m Profitable Quarters before IPO: >5 Quarterly $14.0mm Revenue before IPO: %Change -43.2% Since IPO: TEV / TTM Rev 0.8x TEV / TTM EBITDA 3.6x TEV / 2006E Rev 0.7x TEV / 2006E EBITDA 4.1x Date: 12/08/05 EMC: $228m Profitable Quarters before IPO: >3 Quarterly $25.6mm Revenue before IPO: %Change -4.3% Since IPO: TEV / TTM Rev 1.3x TEV / TTM EBITDA 6.8x TEV / 2006E Rev 1.1x TEV / 2006E EBITDA 5.3x Raised $72.0m Date: 02/09/05 EMC: $1,024m Profitable Quarters before IPO: 4 Quarterly $88.3mm Revenue before IPO: %Change -5.9% Since IPO: TEV / TTM Rev 4.0x TEV / TTM EBITDA 10.0x TEV / 2006E Rev 4.0x TEV / 2006E EBITDA 9.8x Raised $281.9m
  • 20. In the Public Markets, US-Listed Mobile Media Companies Have Underperformed Over The Past Few Months Indices Have Retreated From Gains Posted Earlier In The Year With Asian Mobile Media Companies Suffering The Greatest Decrease Change (%) -21.1% +1.9% +22.3% -5.8% Indices Performance Comparison June 17, 2005 – June 16, 2006 <ul><li>U.S. Mobile Media Index: VeriSign, NeuStar, Syniverse Holdings, WiderThan, InfoSpace, Kongzhong, TOM Online, Linktone, Hurray! Holding </li></ul><ul><li>Asian Mobile Media Index: Faith, Index, For-side.com, Cybird, Access Company, Aplix Corporation </li></ul><ul><li>European Mobile Media Index: Buongiorno Vitaminic, Monstermob Group, Index Multimedia, Opera Software, Bango </li></ul>19 70 80 90 100 110 120 130 140 150 160 170 180 190 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Indexed Price U.S. Mobile Media (1) Asian Mobile Media (2) European Mobile Media (3) NASDAQ
  • 21. While Overall M&A Activity Has Been Declining, Technology M&A Has Been On the Rise Technology M&A Transactions Involving Chinese Targets With Deal Value >$20mn Since 2000 All M&A Transactions Involving Chinese Targets With Deal Value >$20mn Since 2000 Source: Thomson Financial; as of June 16, 2006. Includes completed deals with announced consideration and involving the acquisition of >50% ownership. Over 40% of these transactions were cross-border deals Over 50% of these transactions were cross-border deals (US$Millions) 20
  • 22. Followed By A Number Of High Profile Mobile Media Content / Applications M&A Transactions Acquired by Value: $317m P/R: 2.1x P/EBIT: 20.5x Currency: Cash Acquired by Acquired by Value: $671m P/R: 10.2x P/EBIT: 67.3x Currency: Cash/Stock Value: $129m P/R: Conf. P/EBIT: Conf. Currency: Cash/Stock Acquired by Value: $250m P/R: Conf. P/EBIT: Conf. Currency: Cash Chinese WVAS Sector Is Ripe for M&A and Consolidation 21
  • 23. Summary: Predictions For 2006 And 2007 <ul><ul><li>Venture Investment Will Be Highly Targeted </li></ul></ul><ul><ul><ul><li>Proprietary content, large scale SPs, hybrid wireless/wireless </li></ul></ul></ul><ul><ul><li>Chinese Wireless Sector Will See Substantial Consolidation </li></ul></ul><ul><ul><ul><li>Operator moves, 3G all likely to spur consolidation over the next 12 months </li></ul></ul></ul><ul><ul><li>Chinese Wireless Companies Increasingly Looking To List Outside U.S. </li></ul></ul><ul><ul><ul><li>U.S. appetite for Chinese WVAS IPOs correlated with TOMO, KONG, HRAY </li></ul></ul></ul><ul><ul><ul><li>London, Singapore and Tokyo represent real alternatives with less stringent listing requirements…particularly wireless IPOs </li></ul></ul></ul><ul><ul><ul><li>Hong Kong, in particular, will continue to attract Chinese IPOs given proximity to Mainland, lax disclosure, performance of Tencent </li></ul></ul></ul><ul><ul><ul><li>Growing number of Chinese technology companies below the US$300MM valuation range will choose to either list in London/Hong Kong or grow to larger scale before listing in U.S. </li></ul></ul></ul><ul><ul><li>M&A Will Increasingly Be Deemed a Viable Exit Strategy </li></ul></ul><ul><ul><ul><li>Uncertain, volatile capital markets environment </li></ul></ul></ul><ul><ul><ul><li>Will IPO valuations reflect China “premium” or “emerging market discount”? </li></ul></ul></ul><ul><ul><ul><li>Realization that being public is only the “beginning” </li></ul></ul></ul><ul><ul><ul><li>China is top strategic priority for many international firms </li></ul></ul></ul>22
  • 24. Contact Information <ul><li>David A. Liu 刘大伟 </li></ul><ul><li>Managing Director </li></ul><ul><li>US Tel: 650-573-4803 </li></ul><ul><li>China Tel: 86-1371-823-9325 </li></ul><ul><li>Email: dliu@jefferies.com </li></ul><ul><li>Wei Z. Hopeman 张晨为 </li></ul><ul><li>Vice President & Chief Representative </li></ul><ul><li>US Tel: 650-573-4883 </li></ul><ul><li>China Tel: 86-1391-830-6556 </li></ul><ul><li>Email: whopeman@jefferies.com </li></ul><ul><li>Randy C. Wang 王鸿宇 </li></ul><ul><li>Shanghai Representative </li></ul><ul><li>China Tel: 86-1368-198-5889 </li></ul><ul><li>Email: rwang@jefferies.com </li></ul>23

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