Transforming to be an
Emerging Force in China's
“Internet Economy”
July 5, 2000
Mr. Zhuo Fu Min
Chief Executive Officer
Transaction Summary
 Partner:
– Shanghai Information Investment Inc. ("SII")
 Cross Investment:
– SIHL will pay US$120 MM for 20% of the enlarged share capital of SII
– SII’s major existing shareholder’s wholly owned subsidiary has an
acquire 50 MM shares of SIHL at HK$15.90
 Governance / Management:
– SIHL appoints two directors to SII's Board
– SII’s major shareholder appoints one director to SIHL’s Board
– SII seconds a Chief Technology Officer to SIHL
 Joint Initiatives:
– Cooperate in the existing Shanghai Infoport projects
– Jointly participate in future investments
– Access to the international capital markets
2
SII Highlights
 Investor and project manager of Shanghai Infoport
 Owner of Shanghai’s key Internet infrastructure resources
 Innovator of Internet-based business applications
 Partner of international Internet and telecom players
 Leading player in Shanghai and China’s Internet economy
3
The "Win - Win" Partnership
 Leading player in China's
 International capital markets
Internet economy
experience
 Pilot projects with national
 Overseas brand name
implications
recognition
 Unique core competence
 Public company management
expertise
 Strategic investors / partners
 Enterprise operating capability
4
Strategic Repositioning - The Steps
Formed Partnership with
SII
Formed S.I. Tech
JV Fund with Temasek
and Vertex
Agreed to form Shanghai
High-Tech VC Fund with
SVCC
Acquired Sunway
Biotech Co.
& Merger Ltd.
Invested in Shanghai
Optical Communications
Development Co.
11/98
1/99
8/99
3/00
5
7/00
Participating in Shanghai and China's “Internet
Economy” - The Window of Opportunities
Shanghai
China
Local Incubation
National Implications
 Interactive cable services
 Over 100 MM cable subs in China
 Certificate authority
 China's e-commerce potential
 Credit infobank
 China's urban consumer population
Bottleneck Solutions
Global Internet Connection
 Internet exchange
 Facilitator of China's Internet economy
6
Joining the Unmatched Partners
20% SIHL
8%
SRFT
8%
SOPC
5% SGEG
35% SAIL
24% SPT
7
Mr. Fan Xiping
President and Director
Shanghai Information Investment Inc. (SII)
SII History
 Founded SII
 Initiated CA
 Initiated ATM
project
backbone project
Mature
Growth
Early Stage
Development
 Signed agreement
 Alliance with CMGI
with SFRT to upgrade
cable network
 Launched SIN, SCN
& SHECA
 Launched a
& Compaq
news portal
(Eastday.com)
 Signed JV
 Strategic
Milestones
Timeline
 Signed LOI with
alliance with
Gartner
Group
9/97
3/98
Microsoft to
develop advanced
web services
6/98
10/98
 Signed with TI to
 Initiated
provide broadband
access solutions
(DigiVision)
 Launched Credit
Infobank (CIS)
Shanghai
broadband fiber
network
 Initiated SHIX
project
12/98
8/99
9
11/99
1/00
contracts with
AT&T and
SPT
 Took control
over Cablenet
and initiated
Interactive
Cable Services
(ICS)
5/00
6/00
Strategic Advantages
 Uniquely positioned to invest in "bottleneck" projects
 Ability to create synergies among investments
 World class partners (e.g., CMGI, AT&T, IBM, Microsoft, Texas
Instruments, Gartner Group & GTE)
 Financing capability
 Strong government / shareholder sponsorship
10
Operating Strategies
 Focus on value creation
 Build and operate
 Seek strategic partners
 Apply advanced technologies and management skill sets
 Incubate in Shanghai and apply in nationwide scale
11
Business Focus
Telecom / Internet
Infrastructure
51%
100%
30%
100%
SCN
Broadband
Fiber
Network
Infonet
SHIX (1)
Value-Added Services
Cable
network with
3 MM subs
Broadband
fiber network
builder and
operator
ATM / IP
backbone
Internet
exchange
51%
ICS (2)
(Interactive
Cable
Services)
15%
AT&T JV
(Telecom
VAS)
10%
EastDay
.com
Converged
offerings of
Internet access,
VoIP, e-commerce
and VoD
IP-based
applications
for MNCs
News portal
In Operation
E-Commerce Enabler
45%
35%
SHECA
CIS
12.5% Community
Network
SII IPS (3)
Certificate
Authority
for ECommerce
Credit
Infobank
800
community
Internet
access points
Internet
professional
services
In Development
50%
DigiVision
Broadband
access
solution
provider
(1)SII has 100% operating rights
12
(2) SCN owns 100% of ICS project
(3) SII’s ownership in IPS varies among projects
Infonet - ATM Backbone - Carriers' Carrier
 SPT / China Telecom owns the
remaining 70%
 The only ATM backbone in
North District
Shanghai, one of the largest
metropolitan area ATM backbones
in the world
 1,545 fiber km length
South West
District
Pudong District
switches, 41 Concoder ATM
switches expanding to 268
Shanghai
Online
 Carriers' carrier for ISPs and
ChinaNet
ATM
Platform
 8 Core Nortel Passport 15K
national telecom carriers entering
the Shanghai market
South District
National
Broadband
Backbone
 LQA revenue of US$ 0.26 MM
13
SCN - 2-Way Broadband Alternative
Cable network before upgrading
One-way and analog
49-450 MHz transmitting 36 analog TV signals
Cable network after upgrading
Two-way, digital and interactive
Set-Top Box
5-860 MHz transmitting 90 digital & analog TV signals
PC
14
TV
Tel
ICS - Next Gen. Converged Offering
Bank
E-Commerce
Multimedia
Voice over Cable
Broadband Internet Access
15
AT&T JV - Next Generation
Telecommunication Operator
Network Profile
 First pilot telecom service project in
China open to foreign investors
 Connected to AT&T Global Network
 Facilities-based
 AT&T managed
AT&T
Pudong JV
 Services to be launched late 2000
Targeted Customers
 MNCs
Services / Applications
 VPN
 Other IP-based value-added services
16
SHECA - E-Commerce Enabler
Bank
ISP
Internet
Certificate Center
(SHECA)
Customer / Consumer
17
SHIX - Local and International Internet Exchange
 Only Internet exchange in
Internet
Overseas
Shanghai
 Connected to
international backbones
Shanghai
ICS
Jitong
 Solve traffic bottleneck
and facilitate China's
Internet development
 Aim to become a major
CNC
Router
Router
Unicom
Router
regional and national
Internet exchange center
Router
SHIX
18
Synergistic Investment
Business
Objective
Shareholder
Value
Interactive
Cable Services
VAS
Certificate
Authority
Enabler
Cable
Network
AT&T JV
Credit
Infobank
ATM/IP
Backbone
EastDay.com
Community
Network
Internet
Exchange
Infrastructure
Broadband Fiber Network
19
Internet
Professional
Services
DigiVision
Capital Requirements
(US$ MM)
2000
2001
2002
Infonet (ATM / IP Backbone)
$ 8.7
$ 3.1
n.a.
SCN
74.6
63.9
18.4
66.2
49.6
n.a.
8.4
14.3
18.4
Broadband Fiber Network
55.6
52.9
n.a.
Internet Exchange Center
2.4
0.5
n.a.
AT&T JV Capital Contribution
9.0
5.5
4.9
$ 150.3
$ 125.5
$ 23.3
Network Upgrading
Interactive Cable Services
Total
* Exchange rate: US$ 1 = RMB 8.2
20
Infonet ATM Revenue Projection
(US$ MM)
12.8
14
12
Revenue
10
7.1
8
6
4.0
4
2
2.2
1.2
0
2000E
2001E
2002E
* Exchange rate: US$ 1 = RMB 8.2
21
2003E
2004E
ICS Revenue Projection
(US$ MM)
47.3
50
45
40
32.7
Revenue
35
30
25
19.3
20
15
7.8
10
5
0.7
0
2000E
2001E
2002E
* Exchange rate: US$ 1 = RMB 8.2
22
2003E
2004E
The "Win - Win" Partnership
 Leading player in China's
 International capital markets
Internet economy
experience
 Unique core competence
 International brand name
recognition
 Pilot projects with national
 Public company management
implications
expertise
 Strategic investors / partners
 Enterprise operating capability
23
Mr. Zhuo Fu Min
Chief Executive Officer
SIHL's Strategy
 Committed to full-scale transformation
• Cultivate new high-growth businesses through acquisitions
• Upgrade and transit selected traditional businesses to e-commerce based
by leveraging SII’s investments and new technologies
• Divest non-core and stagnant businesses
 Achieve substantial repositioning through forming partnership
with SII
 Identify and seek synergies between SII's and SIHL's
investments
25
SIHL and SII Joint Initiatives
 SII seconds a Chief Technology Officer to SIHL
 SIHL invests directly in existing projects
 Jointly participate in future investments
 Co-operate in promoting businesses in China
 Seek international partners to participate in SII’s projects
 Access to the international capital markets
26
E-Commerce Meets The "Old Economy"
Case Study - Shanghai Bright Dairy and Food
 A 200-plus convenience store network
 Scope of products available for delivery is currently over 1,300
 Over 232,000 subscribers and 25% of the total volume is delivered through its
distribution network
27
The Perfect Match
Shareholders
value creation
28