China Wi-MAX Business Plan
China Wi-MAX Communications, Inc. (OTCBB: CHWM) is a multinational telecommunications and internet service company with plans to operate in ten cities in China which have rapidly expanding broadband communications needs by providing IP Transport, internet access, and value added Internet services. The Company has acquired fiber assets in Beijing and Hangzhou, option agreements to purchase fiber in Shanghai, and has acquired licenses for 5.8 GHz wireless frequency in Beijing and Shanghai.
Through the combination of fiber and wireless networks, China Wi-MAX is able to provide high bandwidth and high quality of service to a large number of customers at an economical cost. The Company is positioning itself to be a premier provider of managed international data services for foreign corporations operating in China, and world class roaming data services for international and Chinese travelers.
China Wi-MAX is headquartered in Grafton, Wisconsin. It is an Over the Counter Bulletin Board Company which is dually reported on the OTCBB and OTCQB.
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Access the China Telecom Market
Foreign investors may now own up to 49% in basic telecommunication enterprises and up to 50% of value-added telecommunication enterprises in China. China Wi-MAX has access and infrastructure in place to take advantage of this opportunity. China Wi-MAX has a significant presence in China.
China’s growth is not an accident. It is the result of both government policy and the fact that millions of Chinese individuals are entering the middle class and are using telecom services like Internet access and wireless phones.
China has already surpassed the U.S. as the largest market in the world for both Internet users and wireless phone subscribers. It is still growing quickly. During 2008, Internet users in China increased 41.9% to 298 million (Figure 3), with an Internet penetration rate of 22.6%, only slightly higher than the world average of 21.9% and ranking only 87th among all countries. Bottom Line: there is room for China’s growth to continue.
China’s Internet Growth:
The growth in wireless and Internet users in China has promoted the development of applications like business-to-business and business-to-consumer e-commerce, multimedia, voice over IP, hosted software applications and websites catering to Chinese users. The rapid development of these services not only increases the demand for bandwidth, but also drives demand for faster bandwidth, since China’s bandwidth speeds often still lag behind other countries. All of this feeds into an underserved market for more and more bandwidth and more capacity on the network.
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Ten Key City Plan
In total ten key cities in China have been targeted which represents approximately eight percent of the population of China, or 100 million people.
- Beijing
- Tianjin
- Dalian
- Qingdao
- Xi’an
- Shanghai
- Hangzhou
- Chongqing
- Guangzhou
- Shenzhen
China Wi-MAX Four City Plan
The Company became operational in the 4th Quarter of 2010 and launchrf services in Beijing. Operational tests have been successfully demonstrated in 2009 and 2010. CHWM is planning to launch operations in three additional cities, one by one, in the next 12-18 months. These three additional cities are Hangzhou, Shanghai and Tianjin. This “four-city” plan intends to cover up to 200,000 businesses by the end of 2015.
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Beijing Market
China Wi-MAX is currently introducing service offerings to customers on its first fiber network in Beijing.
The Company has a team in place in its Beijing office to provide engineering, customer support and sales. Numerous marketing studies have been completed indicating that the market for high quality broadband connections in Beijing is under-served in capacity and quality of service. The Company’s network is designed to provide the reliability, redundancy, scalability and other features expected of a carrier class network.
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Beijing Fourth Ring Road and China Wi-Max 45 Mile Fiber Ring
With its fiber network installed in Beijing, China Wi-MAX is positioned to expand with the many large commercial buildings within reach of its 45-mile fiber ring around Beijing’s Fourth Ring Road. China Wi-MAX is currently engaged in strategic negotiations with multi-tenant building owners and managers to provide broadband Internet access to those buildings and their tenants.
The 45-mile fiber ring, when combined with the licensed broadband wireless access, is especially valuable because further fiber development in the center of Beijing, which is inside China Wi-MAX’s fiber ring, is currently discouraged. China Wi-Max will use its government-licensed and protected wireless band at 5.8 GHz to extend broadband access eventually to most of Beijing.
5.8GHz Wireless Access
CHWM intends to use 5.8 GHz wireless access to extend the reach of its fiber network (10 miles or more) by connecting buildings beyond the network to those on the fiber ring through roof-top wireless antennae. Using integrated optical fiber and wireless networks greatly increases the potential number of customers the Company can serve.
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Hangzhou Market
In Hangzhou the intention is to develop and grow a significant, recurring revenue stream based on the success of the fiber and wireless model being established in Beijing. Hangzhou Municipality is divided into eight districts (six urban, two suburban), three county-level cities, and two counties. The central six urban districts occupy 682 km² (263.4 mi²) and have a population of over 2 million. The two suburban districts occupy 2,642 km² (1020 mi²) and have over 2 million people. Hangzhou’s industries have traditionally involved textile, silk and machinery, but electronics and other light industries are developing, especially since the start of the new open economy in 1992.
China Wi-MAX currently owns fiber in Hangzhou and will be able to gain access to wireless spectrum when needed. Hangzhou has a population approaching 7 million people.
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Shanghai Market Agreement to Purchase 150 Kilometers (90 miles) of Fiber
China Wi-MAX is also licensed by the government to use its wireless 5.8 GHz spectrum in Shanghai which is the largest city in China and one of the largest metropolitan areas in the world, with over 20 million people.
An agreement has been reached, through its wholly-owned foreign entity subsidiary, Yuan Shan Shi Dai Technology Development Company (“Shi Dai”), to purchase 150 Kilometers (90 miles) of fiber throughout Shanghai (as well as seven other major cities) on favorable terms.
In Shanghai, China Wi-MAX intends to purchase its four Core fiber ring. Initially, the network will be built as a redundant Ethernet Backbone. In the future with no changes to the fiber, WDM (Wave Division Multiplexing) and DWDM (Dense WDM) can push this to signficantly higher limits.
This bandwidth can easily service well over 1,000 of Shanghai’s most desirable buildings. As in preceding China Wi-Max markets, the core network can be dramatically extended over a protected, Licensed 5.8GHZ wireless network by five miles or more beyond it’s own fiber. The ability to expand coverage using point-to-point links over fixed wireless broadband network , will further enhance customer penetration at remarkably low cost, which presents significant additional potential for more revenue and greater profits for the Company.
These options will allow China Wi-MAX to expand a valuable core asset base of fiber optic cable networks and wireless licenses throughout the other major metropolitan areas in China. This agreement and options represent a significant step in fulfilling the Company’s business plan objectives and will significantly enhance the Company’s ability to provide telecommunication services in Shanghai.
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Fiber and Broadband Expansion to Ten Cities
Agreements are in place to acquire fiber and broadband wireless licenses in seven additional Chinese cities in the near future, thereby addressing a population approaching 100 million.
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International Access to China Telecom Market
Since China’s admission to the World Trade Organization (WTO), the number of U.S.-based companies operating and making direct investments in China has boomed. This has resulted in a significantly enhanced need for data services between the United States and China. Large multi-national companies with a significant presence in the United States — and directly operating in China or outsourcing manufacturing there — have high bandwidth needs that are presently very difficult to provision, manage, and very expensive.
Most U.S. companies have preferred telecom vendors (ATT, Verizon, etc). However, these vendors, at this time, are not permitted to terminate directly on mainland China. All data lines entering China must terminate first on an official carrier such as China Telecom or China Netcom. This is even true for US joint venture partners for the new fiber route, the Trans Pacific Express. Even if U.S. telecom companies could overcome this initial obstacle they still are disadvantaged in getting from a point of entry to the local loop of the customer. The result is a multi-vendor segmented link that makes it difficult to coordinate customer installations, and often lacks enforceable “service level agreements” (SLAs).
CHWM sees this problem as a significant market opportunity. With established relationships and agreements, the Company intends to break through the barriers other U.S. based companies have in provisioning services end-to-end between the U.S. and China. This could greatly expand the Company’s service offerings from local access to extended end-to-end Virtual Private LAN Service (VPLS), with associated increases in revenue.
The market opportunity for U.S. to China VPLS (Virtual Private LAN Service) is another significant revenue opportunity. The ARPU (Average Revenue Per Unit) for services in the “four-city” model are in the range of $200 to $6,000 per month. The pricing for VPLS service from the U.S. to China competitively ranges from $13,500 (for a 10MB link) and $82,500 (for a 100MB link). Even a small number of customers of these high value services will be a significant revenue contributor CHWM’s operating plan.
The China to U.S. Customer Connection above, benefits from many of the same mechanisms and technology as the VLAN/VPN. The VPLS service, however, is even more profitable than the more local VLAN/VPN service. With the VLAN/VPN service, the monthly network costs are based only on local loop and local network resources. In the case of VPLS, the Company benefits from fees charging for extending from the local fiber network through mainland China transport ingress/egress, to a wide area network (WAN) provisioned to allow the Company to offer the same stringent service level agreement (SLA) guarantees.
The U.S. to China VPLS is based on the experience and unique relationships of the Company’s leadership. CHWM intends to extend the local loop advantage through the ingress and egress challenges of mainland transport facilities and regulations. Furthermore, China Wi-Max has entered into agreements that provide fiber access to 2.5 Gbp currently and can be expanded in the future to 10Gbps and 100Gbps via dual, as in a protected, fiber connection between Hong Kong and mainland China, closing the most difficult challenge in provisioning to Chain.. The following depicts the network access from Hong Kong to all points of local termination of the Company’s Ten City Plan.
Strategic Acquisitions and Joint Ventures
CHWM’s operating plan assumes that the revenue growth will be through the direct sales and marketing efforts of our Chinese partner companies and US based marketing leadership. However, CHWM’s plan is expected to be significantly accomplished through acquisitions and joint ventures. Directing upward to 60% of capital toward acquisitions and joint ventures in this manner will significantly accelerate the Company’s model for reaching positive cash flow. In fact, the Company has entered into Letter of Intents (LOIs) and Memorandum of Understandings (MOUs) pending funding of CHWM capital plan.
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