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 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. 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 5% of the subscriber market share within 24 months? CU should set competitive pricing on iPhone and associated plans; deliver a clear iPhone message which is most appealing to customers; and set a sustainable strategy to maintain the market shares gained from launching iPhone. 1. CU should set the pricing plans which could achieve market penetration in long term a)After attracting the first adopters, the pricing strategy should decrease gradually over time in 2 years b)The phone subsidy amount have to take unlocking possibilities into account to avoid customers walking away with the unlocked iPhone 3.CU needs to find a “killer” message on iPhone to attract most China users considering switching to 3G a)CU has to sell the most appealing feature of iPhone which China customers want most to overcome the weak brand image of Apple in China b)The “killer message should also stand outs from competitors’ phone like HTC, Blackberry, etc. 4.CU should plan on longer term strategies to sustain the market shares gained from iPhone launch a)CU should look for other smartphone alternatives e.g. oPhone, HTC, etc b)CU should spend resources in improving the network quality in both 2G and 3G c)CU should target on younger age group in long term as younger generation did not have strong bad perceptions on CU 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 - Pricing

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. Case in point – Hong Kong’s iPhone launch iPhone helped Hutchison increased its ARPU by 15% Total iPhone subs contributed 5% of Hutchison’s total subscriber base Data revenue increase is phenomenal – increased by 22% since iPhone launch More than 50% of iPhone users subscribed to the highest tariff plans GRAPH of APRU boost PIE chart of total subs Change in data revenue Conclusion: iPhone can boost ARPU

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. Unicom’s pricing is uncompetitive Total upfront payment is too high Tariff plans are cheap Grey market iPhones are priced cheaper, and they don’t need upfront payment Grey market iPhones have WiFi CHART comparing total upfront payments

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. 7 Section [2] Dummy Charts – Message

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. 3G - What do customers think so far? % of respondent willing to switch number to operator 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. Source: Market research report

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. 3G - What do customers think so far? (Cont’d) % of respondent think pricing of data plan is acceptable 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. Source: Market research report

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. 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 3G - What do customers think so far? (Cont’d)

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. 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 Chinese customization  Low handset production costs  Software platforms Apple store Fetion, Monternet, Mobile market Network standard advantage (with 85% of the world) China Mobile China Unicom iPhone OPhone China Telecom iPhone Vs OPhone

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. 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 Reasons for potentially shifting to Unicom under MNP

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 Section [2] Dummy Charts – Strategy

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. Potential no. of target customers China Unicom plans to capture market size of 30 Million customer in one year after the launch of service i.e. 1/3 rd. of the Chinese 3G market by 2010. The company has earmarked RMB38.7 billion (US$5.6 billion) to develop its 3G business in 2009 Strategy to target customers in one years time Source: Market research report

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. Factors affecting iPhone penetration China Unicom should promote heavily the factors that attract Chinese customers viz: Style, price subsidy, functionality China Unicom should create awareness of geniune Apple iPhone to wary customers from buying look a like or from gray markets. Strategy to target customers in one years time Source: Market research report

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. 16 Features affecting iPhone appeal Apple iPhone will be a popular product in China due to its unique features and sleek look. Disabled Wifi to comply with government regulation will create some set back. China Unicom must work with Apple to improve its battery life and 3G connection.