1. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. How can China Unicom use the iPhone to increase 10% of the subscriber market share within 24 months? MGMT 650B – Consulting Skills for Managers Presented by Team D: BOHRA, Shilpa Rajesh; CHAN, Yat Hei; LIN, Michelle Lan Yan; MO, Siu Hei; TONG, Sze Man; TSE, Mei Yi Joyce

2. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 2 Section [1] Storyline

3. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 3 Storyline – Pyramid Principles China Unicom (“CU”), being the second largest mobile operator in China as well as globally, is facing a highly competitive market resulting with losing subscriber market share in China every year since 2003. SITUATION In August 2009, CU partnered with Apple to launch iPhone 3G in China hoping to regain its subscriber market share. How can CU use the iPhone to increase 10% of the subscriber market share within 24 months? 1.CU has to set the price for iPhone and associated plans and its positioning in China carefully. a)There is a price range to iPhone and associated plans that China subscribers are willing to pay b)Competitors response to CU’s pricing will affect the number of subscribers c)Handset subsidy CU give to subscribers has to be taken into accounts 2.CU has to position itself and iPhone to appeal to mobile phone users a)The uniqueness of iPhone and CU can open up a new market for CU b)The approach that CU takes is required to maintain competitive edge c)CU need to prevent grey market 3.CU has to use effective distribution channels to target their customers. a)The customer segment that CU is going to target will greatly affect the number of subscribers that they can attract. b)The different channels that CU use can effectively reach the targeted subscribers to boost market share. c)The methods that CU apply is convenient for target customers to buy 4.CU has to use promotion initiatives to market iPhone and the associated plans. a)The brand awareness that CU and Apple build can introduce themselves and get the attention from more potential subscribers. b)Advertising in the well chosen locations and media can effectively draw awareness to the iPhone and to China Unicom. c)Other non conventional measure, ie. bloggers, can help China Unicom to advertize more effectively and efficiently. COMPLICATION QUESTION ANSWER RATIONALE

4. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 4 Section [2] Dummy Charts

5. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Premium Pricing Strategy on iPhone in China According to BRICS, 3G services generate 25% to 30% premium over 2G ARPU internationally In China, an average of 29% ARPU premium is charged on data ARPU over blended APRU ARPU premium and proportion of data revenues internationally Source: BRICS

6. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. iPhone Pricing Strategy in Hong Kong Hong Kong “3” has recently launched the iPhone 3Gs plan in Aug 2009. China Unicom can use “3” iPhone pricing strategy as reference Net ARPU increases from Plan B to Plan E as data plan usage and handset subsidies increase “3” - Monthly Tariff & Net ARPU for iPhone 3Gs 16GB version “3” - Monthly Tariff & Net ARPU for iPhone 3Gs 32GB version Source: “3” iPhone plan RMB

7. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. The high end segment of the market will be able to afford the premium pricing of iPhone Source: China Reality Research Monthly Household Income Telecom expenditure accounts for approximately [3%] of household income in China iPhone will target the high end segment of monthly household income of above [Rmb3,001], such that telecom expenditure will represent a minimum of approximately [4%] to monthly household income Telecom expenditure as % household income Source: [China Reality Research]

8. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. China Unicom iPhone vs China Mobile HTC Hero Source: [China Reality Research] At the same monthly tariff, China Unicom iPhone handset value is about $900 higher than China Mobile HTC Hero handset value By paying total of Rmb9,552 for 2 years, China Unicom customers receive a CNY5,388 value iPhone and China Mobile customers receive a CNY4,498 value HTC Hero Unlimited Data + Free Handset Plan (24 Contract Months x ARPU in CNY) RMB

9. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. China Unicom iPhone vs China Mobile HTC Hero Source: China Reality Research Handset Value Breakeven point for China Unicom is CNY225 (CNY5388 / 24 months) vs China Mobile’s is CNY187 (CNY4,498 / 24 months) For both China Unicom and China Mobile, minimum plan charge will be from CNY187 to CNY225 Breakeven Analysis for Unlimited Data + Free Handset Plan (24 Contract Months x ARPU in CNY) RMB

10. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Regulator's Opinion to Price War Source: Interview with Mr. [x] Regulators, Mr. [x] believes that price war by China Unicom or China Mobile is constructive to the industry Regulator's Opinion to Price War

11. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Scenario Analysis of Handset subsidies as % of ARPU by China Unicom & China Mobile Source: [China Reality Research] The percentage of handset subsidies provided to subscribers will appeal subscribers interest to subscribe certain plan with China Unicom instead of China Mobile Handset subsidies as % of ARPU

12. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. China Telecom Market Development Time Market Openness 1987 1995 Strictly government controlled China Telecom Monopoly 2008 Highly regulated and government controlled China Mobile & China Unicom Oligopoly in wireless 3G licenses issued in 2008 Start deregulation and market opening Market new entrant of China Telecom in wireless market China Mobile IPO in 1997 China Unicom IPO in 2000

13. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 13 Factors affecting iPhone positioning

14. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 14 Features affecting iPhone Appeal

15. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 15 Demographic of mobile phone users in China

16. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Current Tariff Structure in China Mobile Industry RMB / Month Tariff Structure (Minutes) 0100 Solely Air time App. 500 mins/mth No data capacity 150 App. 1500 mins/mths 20 MB data capacity Heavy Users / Business Users 2000 mins above 80 MB data capacity Video Air time Casual users Moderate Users 50 200 250

17. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 17 Effectiveness of advertising channel (Base on survey)

18. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 3G adoption intention among urban consumers CU should focus on its promotion resources to increase CU’s brand awareness and iPhone popularity among the 31% of non-3G users considering upgrading to 3G Source: China Reality Research

19. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. WCDMA network is CU’s competitive advantage Source: SA Research CU should advertise its licensed WCDMA network is the most commonly used 3G technology globally and receives widest industry support like Apple and iPhone

20. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Locations CU should spend advertising on CU should place TV commercials on the top 5 cities with highest Income per Capita, namely, Shanghai, Beijing, Zhejiang, Tianjin, Guangdong Source: National Bureau of Statistics

21. Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. Non-Conventional means should also be used to promote CU and iPhone Advertisements should be placed in the most commonly bloggers or websites in China A nationwide electronic platform should be set up to sell iPhone, 3G VAS services and support customer needs Source: [market analysis]