Back in 1995, China didn't even have dial-up networking when China Telecom planned to open two 64-k lines through
Sprint, an American company, one in Beijing and the other in Shanghai, which became the earliest commercial Internet in
China. AsiaInfo (HKG:1675) won this order, thus creating ChinaNet, the first commercial Internet backbone network in
China. So to speak, AsiaInfo was the legend that opened the gate to the world of Internet for China, and it also became
the first Chinese high-tech company that was listed on NASDAQ.
Twenty years later, AsiaInfo, an old telecome software giant, delisted from the American market and listed in Hong Kong,
starting a new journey with a market value of HK 10 billion dollars. However, "the story of AsiaInfo" didn't draw much
attention in Hong Kong. As a matter of fact, while maintaining its original business, it's also been exploring new
fields so as to seize the opportunities in the 5G era. Based on some information made public recently, the author has
conducted an analysis.
1. On the wave of 5G, does AsiaInfo have a chance for breakthroughs in its main business?
For AsiaInfo, BSS (Business Support System) remains its basic business, which had fundamentally supported the survival
and development of AsiaInfo in the last two decades. AsiaInfo provides BSS service mainly for China's three main telecom
operators, China Mobile, China Unicom and China Telecom, as well as China Tower, which was split and integrated from
In many years of telecom operation and maintenance, AsiaInfo has built a deep binding relationship with operators, and
gained an absolute dominating position in the field of BSS. Telecom operators can't run without AsiaInfo, and this part
of business has become as firm as a rock and the core base of AsiaInfo.
With the advent of 5G, AsiaInfo advanced the BSS development for 5G operation in a timely manner, investing an R team of thousands of members. So far, it has launched such business support modules as 5G SA billing system, 5G
end-to-end network slicing management, 5G cloud network integration support system and the support system of 5G
integrated packages, indicating a continuous efficiency improvement of its core business of BSS.
As of June 30, 2020, it is providing services to 262 telecom operator clients, a year-on-year growth of 16.4%, with a
customer retention rate of over 99%, indicating that its leading position in the BSS market of operators had continued
to be solidified.
On the basis of 5G BSS business, AsiaInfo timely launched the 5G OSS business, an online smart system for telecom
operators integrating planning, construction, maintenance and optimization. Through this new-generation network
management system, telecom operators are enabled to construct a smart network management system with neutral network,
neutral business and neutral factory based AsiaInfo as a neutral software supplier.
As a forward-looking new service line, 5G OSS is presenting a trend of booming. In the trial run in the first half of
this year, its layout for commercial use continued to be deepened, with a rapid growth of implementation points. 7
categories of 5G OSS products have been launched, including network operation and maintenance, network layout, control
management, service provisioning, smart analysis and customer perception CEM. These seven categories of products have
been implemented for commercial use in 27 places, generating an income of over 15 million.
Among them, CSMF and NSMF provided by AsiaInfo are China's first operator-level 5G network slicing management systems,
which are both groundbreaking products and technologies related to 5G network intelligentizing.
The value created by the new 5G software services of AsiaInfo hasn't been reflected in its market value in a timely
manner. In fact, there are several American companies providing end-to-end 5G software, including Mavenir, Altiostar and
Parallel, which have drawn wide attention, each with a valuation of over US$2 billion. Based on the huge market in
China, the new 5G OSS business of AsiaInfo will be more rapidly applied in commercial fields, indicating a value in the
future that should never be underestimated.
2. With multiplying breakthroughs in non-operator businesses, how strong a momentum does AsiaInfo have?
In the year of commercial popularization of 5G, with the core capacity it formed in the telecom industry in nearly 30
year, AsiaInfo has also extended its advantage to wider industries and markets, providing important infrastructure
support for the digital transformation of governments and enterprises.
AsiaInfo has put great effort into the development of another two service lines, DsaaS (digital operation), vertical
industry and enterprise cloud integration, aiming to open up a wider market.
The first half of 2020 witnessed a growth by over 90% in the service of DSaaS (digital operation), with a scale over 100
million. With the capacity in products, service, operation and integration it accumulated before, Asia has extended its
scope of service from traditional network ties to a wider range of enterprise customers.
After the disappearance of the demographic dividend, operators have turned to stock operation and value operation. And
AsiaInfo is providing services for the value operation of operators by making full use of its DSaaS data operation. In
the mean time, it has applied its capacity of digital operation to non-operator customers in such industries as banking,
insurance, government affairs, public service and broadcasting.
It's worth noting that on the basis of "desensitized operator data + customers' own data + external data", the DSaaS
(digital operation) service provided by AsiaInfo protects its customers' privacy very well. Judging from the current
progress, AsiaInfo has achieved model breakthroughs in the operator market, and has been continuously infiltrating in
such vertical industries as government affairs, banking and insurance.
AsiaInfo managed to make rapid breakthroughs in the non-operator market for two reasons. First, with its technological
accumulation in many years, it has the capacity to provide its customers with data-driven DSaaS service; and second,
AsiaInfo adopts a business model of digital operation, thus allowing the customers to select from flexible operation
models such as paying by results, SaaS subscription, paying by projects and paying by tool software, etc., which can
facilitate AsiaInfo to rapidly occupy the market of vertical industries with SaaS products, help enterprises to carry
out precise data marketing and help governments to improve their operation efficiency.
Another innovative service is AsiaInfo Cloud, which is an industrial cloud service and solution AsiaInfo created for
vertical industries and cloud integration of enterprises, which is with an emphasis on a cloud-network integration.
AsiaInfo Cloud aims to interconnect networks on the technical end and cloud on the business end, so as to provide
precisely targeted IT digital capacity for customers in such fields as postal service, broadcasting, financing, energy,
health care and retail through cloud products, industrial solutions and cloud MSP (management service provider).
It's worth noting that AsiaInfo Cloud is not in competition with other cloud providers, but rather cooperates with them
in exploiting MSP business models. For example, the first phase of Oriental Shopping, an e-commerce platform has been
successfully launched with AsiaInfo and AliCloud providing technical support together. AsiaInfo and AliCloud has
established a cooperation to exploit the market of large enterprises in vertical industries and develop such industrial
solutions as energy cloud, financial cloud and transportation cloud.
Not only does AsiaInfo work closely with AliCloud, it has also established cooperation with such cloud computing
providers as Tecent Cloud, Baidu Cloud, Huawei Cloud, Amazon AWS, Mobile Cloud, E Cloud, Wo Cloud and UCloud. According
to data of the first half of the year, AsiaInfo provides cloud service for 64 large enterprises in vertical industries,
a year-on-year growth of 48.8%, with an income growth by 103%, reaching 68.15 million yuan.
With the three new businesses, respectively DSaaS digital operation, cloud service and 5G OSS, combined with the
traditional business of BSS, AsiaInfo has entered a fast track in implementing the strategy of "one solidifying and
three developments" it established in recent years.
3. The pandemic has a largely positive influence on AsiaInfo
The outbreak of COVID-19 in 2020 disturbed the normal running of many companies, but it seems that Asia has not been
greatly influenced. Its performance indicated that it's operation wasn't influenced by the pandemic and it has rather
made breakthroughs in new services.
According to the interim performance report in the six months as of June 30, 2020, which has not been audited yet,
AsiaInfo had realized an operation revenue of around 2.5041 billion yuan, a year-on-year growth of 1.0%, and a net
profit of around 232.6 million yuan, a year-on-year growth of 228.8%. The income from new businesses had reached around
229.7 million yuan, a year-on-year growth of 77.7%.
The pandemic even helped AsiaInfo to exploit a new market. Based on its DSaaS products, technology and data, AsiaInfo
responded fast and launched sixteen products and solutions for epidemic prevention and control.
Among them, the product of people and pandemic trend perception, 3D immersive data visualization solutions for sensitive
areas and joint operation program for public health emergency of COVID-19 were recommended by the Ministry of Science
and Technology; the demographic big data platform for epidemic prevention and control was recommended by CAICT and Open
Source Industrial Alliance of Cloud Computing; and the program of epidemic prevention and control based on big data of
space-time locations entered the list of industrial Internet platform solutions supporting epidemic prevention and
control and work resumption made by the Ministry of Industry and Information Technology.
The health codes and epidemic prevention and control systems adopted by various provinces and cities are greatly
supported by the products provided by AsiaInfo.
4. Why did China Mobile become a shareholder of AsiaInfo?
In April 2020, China Mobile entered into a strategic investment agreement with AsiaInfo, and purchased 20% of the
outstanding shares with an investment of HK$1.385 billion. Some analysis pointed out that this was related to the
gradual application of 5G in China. At present, there are some new changes in the application scenarios of 5G, the three
application scenarios of eMBB, mMTC and uRLLC have enabled 5G to be applied in more industries.
The diversity of industrial application has posed higher requirements for stable performance, reliability, safety and
adaptability to particular workplaces. In the process 5G energizes vertical industries, industrial perception is one of
the difficulties it's faced with. In the context of varying logical systems of different industries, operators and
vertical industries need to work together and conduct in-depth studies, so as to create effective products and
solutions, thus enabling enterprises to achieve digital transformation based on 5G networks.
Since customers from vertical industries mostly construct exclusive or private networks in their application of 5G, 5G
energizing is faced with the challenge of exclusive network integration; besides, it also faces such challenges as the
integration of technical norms and standards, as well as business models. During this transformation, the relationship
between operators and customers from vertical industries will gradually change from simply providing services to working
together as partners.
For one thing, AsiaInfo has an operator advantage and strong capacity of communication networks; for another, it has
professional teams dedicated to the service development and application for vertical industries, enabling it to combine
business scenarios and network communication, especially data collection and transmission and construct exclusive 5G
networks for various industries or vertical industries, thus forming a great advantage of the company in vertical
industries and cloud service for enterprises.
China Mobile values AsiaInfo not just because of its traditional business of BSS. More importantly, it's because of
AsiaInfo's ability to expand scenarios in vertical industries, including but not limited to the in-depth exploration in
such fields as smart cities, smart energy, smart financing and smart medical service.
5. The valuation space of AsiaInfo
At present, the share price of AsiaInfo is HK$11.02. Calculated by adjusted net profit, its PE ratio hasn't even reached
13, with a total market value of HK$10.09 billion. AsiaInfo is obviously undervalued now.
Based on AsiaInfo's traditional business of BSS, it's expected to achieve a sales volume of about CNY6 billion and a
profit of over CNY600 million in 2020, with an annual growth of 10%, which shows that the valuation of HK$10 billion is
already an undervaluation, without even taking its three new services into account.
According to the data in the first half of the year, the growth rate of AsiaInfo's three new services reached 77.7%.
According to an analysis on its innovation of business models, it's estimated that its new services will accelerate the
generation of cash flow. Therefore, a valuation with a PE ratio of less than 13 times is extremely conservative and
Therefore, in the case of a 30x valuation, which is used for similar technology stocks, the reasonable market value of
AsiaInfo may potentially reach HK$20 billion. At present, the company is still in a process of testing its new services.
By March next year when AsiaInfo publishes its annual report, as soon as the market finds that great breakthroughs have
been made in the new services of AsiaInfo, it may make another valuation of this company, which is worth looking forward