This is a summary of the third quarter fiscal 2008 earnings call conducted by AsiaInfo Holding, Inc. (ASIA) on October 30, 2008.
Management:
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President and CEO: Steve Zhang
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VP and CFO: Eileen Chu
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Director of IR: Sheryl Zhang
Key Investor Issues:
- Income from operations increases 68.9% year over year to $5.3 million; operating margin of total revenue expanded to 11.8%.
- Third quarter 2008 total revenue increased 38.4% from a year ago to $44.8 million.
- Exceeding guidance, net revenue increased 44.6% to $42.7 million. In the third quarter, AsiaInfo announced several significant contracts with China''s major telecom carriers.
Third Quarter Highlights:
- Net revenue for the quarter grew to $43 million, an increase of nearly 45% year-over-year, which exceeded the company’s guidance.
- Net operating income grew to $5.3 million, an increase of approximately 69% year-over-year.
Each operator currently faces the challenge of building out infrastructure to support its fully integrated services. For example, China Telecom is now working to integrate the CDMA business it acquired from China Unicom with existing fixed line and broadband business. Similarly, China Unicom is focused on building out its newly acquired fixed line and broadband infrastructure and integrating its entire business.
China Mobile is working to build-out TD-SCDMA infrastructure, which will probably be completed in early 2009.
Right now the company is working with them to add TD functionality to their existing IT infrastructure. In the future, they will be working to build out their broadband infrastructure and AsiaInfo hopes to be involved in upgrading their existing infrastructure to support that as well.
In the quarters to come, AsiaInfo sees opportunities for organic growth primarily in two areas.
First, each carrier will have to operate a complete bundle of services, so each will have to upgrade its existing IT infrastructure to support that kind of activity. And second, increased competition among carriers will continue to drive spending on IT software and services that can help them differentiate their service offerings and increase marketing effectiveness.
It is still early to predict the details of how events will unfold, but AsiaInfo believes telecom industry restructuring and the eventual 3G rollout will bring more exciting opportunities. In the China Telecom account, nine contracts for billing solutions were up for bid. AsiaInfo won two of those contracts in Heilongjiang and Henan provinces to develop billing and CRM systems. Bidding was also opened to build online charging system in five provinces, of which AsiaInfo won one contract.
Lastly, ten contracts for Business Intelligence solutions were opened for bidding and AsiaInfo won three of them in Beijing municipality, and Henan and Heilongjiang provinces.
In the coming quarter, AsiaInfo expects to see opportunities continuing to arise from China Telecom’s aggressive build-out.
AsiaInfo expects five provinces to open up for OCS bidding in either the fourth quarter of 2008 or first quarter of 2009.
On the China Unicom side, eight billing contracts and eight Business Intelligence contracts were up for bids. China Unicom has also opened up seven provinces for trial of OCS systems.
For China Mobile, existing infrastructure needs to be upgraded.
AsiaInfo is focusing its offers on upgrading their infrastructure for work with the TD-SCDMA systems they are rolling out. Over the course of the next six months, China Mobile will be expanding TD-SCDMA to 28 cities.
Traditionally, this space was dominated by the service providers. But as the operators became more sophisticated and the opportunities increased revenue, they built out their own value-added services and kept more of the profits.
AsiaInfo has spent over a decade adapting and competing in China’s rapidly evolving telecommunication market, and is the market leader in BOSS systems with approximately 30% market share across 10 provincial China Mobile subsidiaries.
