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AsiaInfo-Linkage, Inc. Leading Provider of Telecommunications
Software and Services
NASDAQ: ASIA March 1, 2013
The information contained in this presentation is as of March 1, 2013. AsiaInfo-Linkage assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments. This presentation contains forward-looking information about AsiaInfo-Linkage’s operating results and business prospects that involve substantial risks and uncertainties. You can identify these statements by the fact that they use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: government telecommunications infrastructure and budgetary policy in China; our ability to maintain our concentrated customer base; the long and variable billing cycles for our products and services that can cause our revenues and operating results to vary significantly from period to period; our ability to meet our working capital requirements; our ability to retain our executive officers; our ability to attract and retain skilled personnel; potential liabilities we are exposed to because we extend warranties to our customers; risks associated with cost overruns and delays; our ability to develop or acquire new products or enhancements to our software products that are marketable on a timely and cost-effective basis; our ability to adequately protect our proprietary rights; the competitive nature of the markets we operate in; and political and economic policies of the Chinese government. A further list and description of these risks, uncertainties, and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and in our periodic reports on Forms 10-Q and 8-K (if any) filed with the United States Securities and Exchange Commission and available at www.sec.gov.
Safe Harbor Statement
1
Company Background
• AsiaInfo-Linkage, Inc. (NASDAQ: ASIA) is a leading provider of high-quality telecommunications software solutions and services (No. 1 BSS solution provider in Asia Pacific)*
• IPO on the NASDAQ exchange in March 2000 • Delaware incorporated—US company · The only US-listed Chinese software company, incorporated in the US • Highest level of accounting and corporate governance policies · • Leading position in China’s telecom software and services market Our vision is to be the leading solution provider in the global telecom industry,
enabling the connected digital lifestyle, helping our customers to build, maintain, operate and constantly improve their network and IT infrastructure
2
A “10-K filer,” not FPI (foreign private issuer); subject to higher disclosure requirements
* Source: Gartner
Steve Zhang President and CEO
• Joined AsiaInfo-Linkage in December 1999 as VP for Software
• Appointed CEO of AsiaInfo-Linkage in May 2005
• Prior to AsiaInfo-Linkage, 10 years experience at several successful companies in Silicon Valley
• Bachelor’s degree in Information Science, University of Pisa, Italy
• Master’s degree in Computer Science, Rice University
• Listed as one of “Asia’s 25 Hottest People in Business” by Fortune Magazine in 2012
Michael Wu CFO
• Joined AsiaInfo-Linkage in August 2010 as CFO
• Served as the CFO of iSoftStone Information Service Corporation
• Served as Finance VP at Huawei Technology
• Served in other financial managerial roles at Lucent Technologies China and SAP China
• MBA from City University of Seattle
Presentation Team
3
Core Business Overview
Telecom Software Solutions: Customer Relationship Management
(CRM)
Billing
Business Intelligence (BI)
Serving all 3 telecom operators and
majority of provincial level entities
4
CRM
FY2012 Revenue Breakdown*
5
*As of December 31, 2012
China Telecom 17.2%
Others 4.2%
China Mobile 52.8% China Unicom
25.8%
Revenue Streams
6
On-going Services (OGS)—maintenance and daily operational functions
3
Change of Requirements (CR)—smaller and immediate upgrades
2
Project Revenue—new contracts and annual upgrade requirements
1
Non-Recurring
Recurring
Key Facts
7
> 890m customers serviced by our systems
6b call detail records processed every day by our systems
7PB data analyzed every day by our BI systems
115m WLAN/Broadband customers are authenticated by our systems
20,000+ servers running our BSS applications @ 24x7x365
36m Online Transaction / Day
48m Replenishments / Day
40,000+ agents
AsiaInfo-Linkage Competitive Advantage
8
What’s their Telco 2.0 Strategy ? • Adding value to OTT services and
generate new revenues
Operational Challenges: • How to increase subscribers and
increase ARPU in the highly saturated market?
• How to lower the cost to support larger customer base?
Heavy Investment in Infrastructure: • New Technology for Infrastructure • New Application Platforms
AsiaInfo-Linkage Capabilities
Operators Strategic Initiative
Infrastructure Integrator
Business Operational Consulting
IT Planning & Consulting
IT Project Implement & System Maintenance
• Understand the strategy
• Enable the digital lifestyle
Business Strategy
Business Operation
Business Support System
Infrastructure
Satisfy operators’ key strategic and operational initiatives with core IT solutions
Investment Highlights & Business Strategy
9
Investment Highlights
Large and growing market opportunity
Market leader with extensive customer base
Comprehensive product and service offering
High product stickiness and barriers to entry
Strong financial position
Disciplined growth strategy
10
Over 18 years of operating history 1
6
7
5
4
3
2
EBITDA Margins (2012)
45%
34%
Enabling our Customers’ Financial Success
Subscribers (2012)
715 million
107 million
BSS/OSS spend per sub (2012)
$0.70**
$10.00*
China Mobile AT&T * Conservative estimate from published data ** ~$500 million (60% of which is AsiaInfo-Linkage)
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Dominant Market Share
13
CRM/Billing/BI Leading position in three core products
with about 50% market share
AsiaInfo-Linkage
56%
Others44%
China Operators’ Billing Market Share 56% Market Share
AsiaInfo-Linkage
37%Others
63%
China Operators’ BI Market Share
37% Market Share
AsiaInfo-Linkage
56%
Others44%
56% Market Share
China Operators’ CRM Market Share
14
AsiaInfo is Financially Strong
37% CAGR +
+
3 Groups
× 31 Provinces
96 Potential
Customers = 3 + 93 Operators
Market Leader with Extensive Customer Base (cont’d)
14
Digital Lifestyle Enablement
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Stage I
Jan 13, 2010 Chinese government pushing
convergence
Policy Launch Stage II
Focus on cable / telco dual- way entrance
Pilot
Stage III
Pilots wrap-up and expansion
Implementation
Mobile China Mobile China Unicom
Cable Many small operators
Stage I
Fixed+ Broadband China Telecom China Netcom
Stage II Cable
Many small operators
Fixed+Broadband+Mobile China Mobile
China Telecom China Unicom
Triple play
China Mobile China Telecom China Unicom
One Cable operator
Stage III
Triple Play – New Market Dynamic
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Our International Expansion
Up to 2010… • No. 1 in China • Strong
customer base • High entry
barriers • Remarkable
success & potential
2010 onwards • Zong • Mfone • U Mobile • Nepal Telecom • And more…
2012 • Regional HQ in
Cambridge UK • Appointed Alex
Hawker as GM EMEA
• International Marketing established
• Completed Phase 1 BSS transformation for Nepal Telecom within 4 months
2013 & beyond • Launched
Veris™ product suite for EMEA
• Showcased Veris™ at Mobile World Congress 2013
• Kick-started customer engagement in Europe and Middle East
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High Barriers to Entry in Domestic Market
18
Competitors
Early Mover Advantage
Comprehensive Product and Service Portfolio
Product Stickiness – High Switching Costs
Deep Relationship with All Three Chinese Telecom Operators at HQ and Provincial Levels
Large Investment in R&D
1 4G Mobile Virtual Network Operator (MVNO) Monetization of Data
2 International expansion—Southeast Asia telecom market and other regions around the world
Disciplined Growth Strategy
3 Expand into domestic cable market—Triple Play Mobile number portability (MNP)
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4 Move up the value chain within the domestic telecom vertical
Financial Highlights
20
0.0
100.0
200.0
300.0
400.0
500.0
600.0
2006 2007 2008 2009 2010 2011 2012
Service & third-party hardware revenue net of third-party hardware costs
Software products and solution revenue
97 78
134
202
329
US$ mm
Consistent Revenue Growth
21
464
530
Net Cash Balance (1)
Strong Balance Sheet and Margin Profile Non-GAAP Gross Profit and Margin (2)
Non-GAAP Op. Profit and Margin (2) Non-GAAP Net Income and Margin (2)
22
1. Cash balance excludes restricted cash and short term investments. 2. Reflects GAAP gross, operating and net profits as a percentage of net revenue. 3. Excludes amortization of intangibles resulting from the acquisition of Linkage Technologies.
US$mm
US$mm US$mm
6% 11%
14% 17%
25% 24%
14%
0%
5%
10%
15%
20%
25%
30%
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 2012 Operating Profit % Margin
29% 41%
46% 56%
55% 50%
45%
0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012 Gross Profit Gross Margin
5%
15%
18%
25%
28%
24%
16%
0%
5%
10%
15%
20%
25%
30%
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 2012 Net Income % Margin
0
50
100
150
200
250
300
2006 2007 2008 2009 2010 2011 2012 Net Cash Balance
US$mm
2013 Q1 Guidance Overview (US$ mm, except EPS, Margin) 2012 Q4 Margin 2013 Q1 Net Revenue (non-GAAP) 155.2 - 133.0-136.0
Gross Profit 55.2 47.4% -
Operating Income 29.5 19.0% -
Net Income (non-GAAP) 30.1 19.4% -
EPS (basic, non-GAAP) 0.41 - 0.23-0.25
1. Margins are non-GAAP of net revenue 2. Non GAAP Net revenue and Non GAAP net income per basic share 3. Gross margin of net revenue (non-GAAP) is calculated by dividing gross profit, , excluding third-party hardware costs, amortization of acquired intangible
assets, and share-based compensation expenses, by net revenue (non-GAAP) 4. Operating margin of net revenue (non-GAAP) is calculated by dividing income from operations, amortization of acquired intangible assets, share-based
compensation expenses, and non-recurring consulting related expenses, by net revenue (non-GAAP) 5. As of December 31, 2012, includes cash and cash equivalents, restricted cash and short-term investments 6. Weighted average of basic shares as of December 31, 2012
Cash Balance: $353.9 million
Shares Outstanding: 72.7 million
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(5)
(6)
(3)
(2)
(1)
(4)
(2)