MGMT 650B – Consulting Skills for Managers

1. How can China Unicom use the iPhone to increase 5% 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. Section [1] Storyline

3. Executive Summary SITUATION 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. In August 2009, CU partnered with Apple to launch iPhone 3G in China hoping to regain its subscriber market share. COMPLICATION China mobile subscribers has been growing rapidly but CU has not benefited yet losing on an average of 2% of subscriber market share each year since 2003. QUESTION How can CU use the iPhone to increase 5% of the subscriber market share within 24 months? ANSWER CU should cut iPhone handset price by 15% - 20%, deliver a clear message to potential subscribers that iPhone is a “lifestyle” mobile phone which can improve subscribers’ life and not just like any other smart phones, and reinvest its image as a premium operator. RATIONALE • 1. iPhone handset price should be cut by 15% - 20% • Mobile users complain current handset price is higher than grey market iPhone price. • Distributors are making money RATIONALE • Deliver a clear message to potential subscribers that iPhone is a “lifestyle” improving life mobile phone and not just like any other smart phones RATIONALE • 3. Reinvest its image as a premium operator • Younger age group, high tech gurus, top management should be CU’s targeted customer segments • Improvement in 2G and 3G network shows increase of subscriptions • From now and beyond 24 months, CU should build and develop its own data platform which can be used on iPhone or any other smart phone which corresponds to the improving “lifestyle” image and subsequently into a premium operator.

4. Section [2] Dummy Charts - Pricing 4

5. Section [2] Dummy Charts – Message 5

6. 3G - What do customers think so far? • Of 300,000 respondents, 47% potential customers are more willing to change to China Unicom than China Telecom . • It could be due to the fact that these customers are aware that some of the more popular 3G handsets will only work on China Unicom’s WCMDA network. % of respondent willing to switch number to operator Source: Market research report

7. 3G - What do customers think so far? (Cont’d) • Of 300,000 respondents, 42% customers think pricing of China Telecom is more reasonable comparing to 17% of China Unicom. • This could be due to the fact that China Telecom’s data plan charges is time based instead of the usual byte based, which is more “user friendly” in nature. % of respondent think pricing of data plan is acceptable Source: Market research report

8. 3G - What do customers think so far? (Cont’d) • High-speed mobile internet access is the most likely service that will gain interest from customers as it is nominated as the most appealing 3G service. The most appealing 3G applications is Source: Market research report

9. Is iPhone Special? Can iPhone Deliver? • Apparently, what iPhone can deliver to customers in China is similar to what OPhone is offering by China Mobile and China Telecom iPhone Vs OPhone iPhone OPhone China Unicom China Mobile China Telecom • Chinese customization   • Low handset production costs   • Software platforms Apple store Fetion, Monternet, Mobile market • Network standard advantage    (with 85% of the world)

10. Reasons for potentially shifting to Unicomunder MNP • Potential for cheaper prices and promotions is the number one attractions for customers to switch to China Unicom Reasons for potentially shifting to Unicom Source: Market research report

11. Section [2] Dummy Charts – Strategy 11

12. Strategy 1 -Targeted Customer Segments • The customer segment should target the _______age group, high technology gurus, high management employees • From ______ Strategy to target customers in one years time Source: Market research report

13. Strategy 1 -Targeted Customer Segments • Any more charts/ data for the segment? Strategy to target customers in one years time Source: Market research report

14. Strategy 2 - Improve its telecommunication network • RMB38.7 billion (US$5.6 billion) has earmarked to develop its 3G business in 2009 but it still has a weak telecommunication network. • At the moment, China Unicom has the least telecommunication ports in China as compared with its competitors. Source:

15. Success Case from China Telecom • China Telecom was granted with the WCDMA technology in ________ from China Unicom. China Telecom has spent RMB ______ billion in improving its telecommunication network • After improving its network, China Telecom has an increase of ___% of subscription • We anticipate if China Unicom improves it telecommunication and 3G network, it can benefit subscription increment like China Telecom. Tim, please kindly give us info on the subscription improvement and the amount that China Telecom has spent on improving its network. Thanks. 15

16. Strategy 3 - Develop its own unique data platform • To maintain and sustain subscription growth in 24 months and beyond, China Unicom should develop its own data platform that can be used on iPhone and other smartphones. • The data platform should correspond to the “lifestyle” message and should be unique to each customers. • The data platform would be the killer weapon against its competitors instead of purely rely on Apple app store or other 3rd parties data platform. • Any Success Stories? 16