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4th Priority: Mobile operator license opportunity in Chininsia.

4 licenses are due for renewal in Chininsia, the worlds 4th largest mobile market, presenting an
excellent opportunity to expand into the Asia Pacific Region. There are uncertainties about the

bidding rules being changed by the newly elected government to favour current license holders.
We need to decide what is the best way to enter this market or not to enter at all.

Should we enter Chininsia?
We have never played in Asia Pacific before so it was imperative we first assess the country
using Porter's Diamond (Appendix 2). Overall, we found sophisticated demand conditions, the

right basic and advanced factor conditions, strong related and supporting industry and an
oligopolistic market structure with intense rivalry which have combined to give Chininsia some
Competitive Advantage in the mobile industry. We used Porter 5 Forces to assess the

attractiveness of the mobile industry itself (Appendix 4). Overall, we did not find it attractive due
to high entry barriers, strong buyer power and intense rivalry that cannot easily negate the weak

supplier power and a low threat of substitutes.

Should the board nonetheless decide to enter this market, it needs to make the best
choice between an acquisition and direct entry in the light of the uncertainty around the
bidding rules being changed.

What is the best entry strategy: Acquisition or direct?

We are considering acquiring CloudNet and bidding as a local company or bid directly. Both of
these options have win-loose scenarios as calculated in Appendix 8 and applied here.

Situation 1: If bidding rules stay the same:
Acquiring CloudNet will deliver an EV of -S$597m should we bid and loose but will secure an

EV of S$403m should we bid and win, providing an overall EV of -S$194m. Meanwhile bidding
directly delivers a much smaller loss of S$9m if we bid and loose. We stand to gain S$80 if we
won, with an overall EV of S$71.80m.

Situation 2: If bidding rules are changed

Acquisition delivers an EV of -S$398m should we bid and loose but will deliver an EV of
S$604m should we win, with an overall EV of S$206m. Meanwhile direct bidding delivers a
much smaller loss of S$14m and a gain of S$8 if we won, leading to an overall EV of -S$7.

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2016'
www.charterquest.co.za | Email: thecfo@charterquest.co.za