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PricewaterhouseCoopers Zhong Tian LLP

MoneyTreeTM China TMT ReportQ3/Q4 2014 Data source: Zero2IPO Research

Technology Institute

This MoneyTreeTM China Telecommunications, Media and Technology (TMT) Report includes information on private equity and venture capital (PE/VC) investment in the TMT industry for Q3/Q4 2014, as well as 2012 and 2013.

Table of contents

1. Overview 3

2. PE/VC investments in the TMT industry 4

TMT industry investments compared to all industries 4

Investments by quarter 6

Investments by sector 7

First-time funding compared with follow-on funding 10

Investments by stage of development 12

Investments by region 15

3. PE/VC exits in the TMT industry 16

Exits by quarter 16

Exits by type 17

Exits by sector 19

4. Sector focus: Technology, Internet, and Telecommunications and Mobile

20

Investments in Technology 20

Investments in Internet 26

Investments in Telecommunications and Mobile 32

5. A close look at investments in Mobile 36

6. Methodology and definitions 39

7. Contacts 41

4 MoneyTreeTM China TMT Report Q3/Q4 2014

The exponential growth of the Telecommmunications, Media and Technology (TMT) industry in China reached a new level in 2014. Driven by a combination of factors such as new technologies, new applications and emerging market demand, a growing number of start-ups captured the public’s attention with their highly innovative products and services, demonstrating enormous growth potential and profitability.

In the first half of 2014, overall private equity and venture capital (PE/VC) investment soared from its early lows, and an investment spurt occurred in the second half of the year with the introduction of entrepreneurship and innovation incentive policies by the government. Total investment in 2014 doubled that of 2013, and the aggregate investment increased 35% year on year (YOY).

In particular, TMT far outshone all other industries. In the first half of 2014 alone, investments in TMT companies exceeded the full-year total of 2013. With a further 8% pickup in investment growth in the second half of the year (relative to the first half), total deal value in full-year 2014 hit US$15.9 billion, with total investment growing 118% from the US$7.3 billion in 2013; the total number of investments in 2014 increased to 1,241, a growth of 47% compared to 2013. In 2014, both the investment amount and volume in TMT companies have broken previous records since 2012 when we started to track investment trends.

As the Chinese economy entered the “New Normal” growth mode, the “Internet +” theory gradually took hold in various traditional industries, where the Internet, instead of merely playing a supplementary role, started to play a dominant role and contribute greater economic benefits resulting in new industries. Boasting unlimited possibilities, “Internet +” brought about the rise of increasingly more start-ups as well as attracting capital from institutional investors. In the

1. Overviewsecond half of 2014 the number of investments in the TMT industry hit its highest point since we started to track investment trends in 2012. There were 15 TMT deals with a deal size of over US$100 million, with the biggest single deal recorded at US$1.1 billion. These enterprises attracted generous investments due to their steady growth and expansion.

TMT investment in 2014 was characterized by increased merger and acquisition (M&A) activity. More and more TMT investors chose M&A as the preferred exit strategy, resulting in the number of M&As in Q4 outstripping IPOs. IPO in the US is no longer a mainstream exit strategy. IPO on a US stock exchange typically entails high cost and low valuation in contrast to the high valuation TMT companies receive on the China Capital Market. The introduction of a Registration Based System will motivate more and more companies to choose to list as an A-share or on the New Third Market (an OTC market for growth enterprises) in China.

TMT is long past the stage of low technical maturity, low recognition and high risks. Today, the TMT industry is governed by well-defined government regulations, and its products and services have become increasingly innovative and unique. Highly lucrative as it is, the TMT market involves inherent risks. Therefore, systematic and rational analysis of development trends and investment value is crucial to effective and responsible investment decision-making. This report endeavors to provide a clear understanding of PE/VC investment and exit strategy in the TMT industry as a whole and the Technology, Internet and Telecommunications and Mobile segments individually, as well as the future trends of the market.

If you would like to discuss your thoughts and ideas about this report, please contact us. We are looking forward to hearing from you!

Marcel FenezGlobal Leader Entertainment and Media PwC China TMT Leader

Jianbin GaoPwC China Technology Industry Leader


In Q3, the deal volume of overall PE/VC and TMT industry investments both reached historical highs since 2012, but single-deal value decreased a lot.

In the first half of 2014, overall PE/VC investments started at a low level. but then surged ahead, leading to a big leap. In Q2 2014, the deal value of PE/VC investments reached US$17,612 million, while the deal volume reached 412, a historical high since 2012 when we started to track the investment trend. The deal volume in the TMT industry accounted for 52% of the total of all industries in Q2, and that increased to 67% in Q3. However, the proportion of deal value dropped significantly from 30% in Q2 to 22% in

TMT industry investments compared with all industries

2. PE/VC investments in the TMT industry

Overall investment in Q3 and Q4 2014 had the following characteristics:

1. Total investment fell off from the historical peak in Q2 but remained high, with aggregate investment hitting a new record high since 2012 when we started to track investment trends;

2. The Chinese economy geared down to the “New Normal” growth mode. Investment in the industry saw a growth spurt with the introduction of a series of incentive policies for entrepreneurship and innovation by the government;

3. Booming stock markets and the New Third Market brought about the wealth effect, attracting increasing investment to high-growth enterprises.

PwC Viewpoints

Q3, further evidence of the low average single deal value and high deal volume in the TMT industry.

The single deal value and deal volume dropped in Q4, but the overall trend is still optimistic.

In Q4 2014, PE/VC investment volume decreased 4% and the deal value saw a 30% downturn QoQ. Although the deal volume in Q4 was also 10% lower than that of Q3, the deal value of TMT industry investments in Q4 had a good performance.

In summary, both overall PE/VC investment and TMT industry investment in the second half of 2014 was at a high level and continued the strong trend of the first half of 2014.

The overall industry investments in the second half of 2014 dropped significantly compared to the big leap seen in the first half of 2014, but remained on an upward trend, compared to the previous two years. Total TMT deal volume accounted for 65% of overall industry investments.


Overall PE/VC investments

In Q3 2014, China saw a total of 618 PE/VC investments across all industries totaling US$16,084 million. This was an increase of 50% by volume but a decline of 9% by value compared to Q2 2014.

In Q4 2014, there were a total of 593 PE/VC investments, which represented a decrease of 4% compared to Q3 2014. The deal value of US$11,230 million decreased 30% compared to Q3 2014.

Figure 1: Comparison of PE/VC investments and TMT investments 2012-2014 (Deal value)

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14Q3’13

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

$9,034

$927

$6,335

$1,578

$10,360

$3,448$4,214

$1,281

$3,240

$1,167

$6,675

$752

$7,531

$1,908

$7,284

$3,449

$5,868

$2,304

$17,612$16,084

$11,230

$5,346

$3,535$4,706

PE/VC funding in all industries

US$m

PE/VC funding in TMT industry

Figure 2 : Comparison of PE/VC investments and TMT investments 2012-2014 (Deal volume)

600

500

400

300

200

100

0

244

454

243

487

255

496

192

314

157

257

190

259

230

476

269

463

336

245 214

412

618

411

593

371

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14Q3’13

PE/VC deal volume in all industries PE/VC deal volume in TMT industry

PE/VC investments in TMT

In Q3 2014, there were 411 PE/VC investments in the TMT industry, accounting for 67% of total volume across all industries. The deal value US$3,535 million represented 22% of the total PE/VC deal value in the corresponding period.

In Q4 2014, the number of TMT investments reached 371, accounting for 63% of total PE/VC volume. Meanwhile, deal value was US$4,706 million, comprising 42% of the total PE/VC deal size.


Investments by quarter

In the third quarter of 2014, there were 411 deals in the TMT sector, a rise of 92% over Q2 2014. The deal value amounted to US$3,535 million, a decrease of 34% compared to Q2 2014.

In the fourth quarter of 2014, there were 371 deals, a drop of 10% compared to Q3 2014. The rise in value was even more significant, with investment totaling US$4,706 million, up 33% compared to Q3 2014.

Figure 3: Investments by quarter 2012-2014 (Deal volume/Deal value)

6,000

5,000

4,000

3,000

2,000

1,000

0

450

350

250

150

0

Q1’12Q2’12Q3’12Q4’12Q1’13Q2’13 Q4’13Q1’14Q2’14Q3’14Q4’14Q3’13

244 243

192157

190

230269

245255

$927$1,578

$3,448

$1,281

$1,167 $752

$1,908 $3,449 $2,304

$5,346

$3,535

$4,706

214

411

371

Deal value Deal volume

US$m

In Q3, the deal volume reached the highest figure since 2012.

In Q3, TMT industry investments continued the strong trend of the first half of 2014. Despite a slight decrease in deal value, the deal volume still reached a new record.

In Q3 2014, the average single deal size was US$10.37 million and decreased 64% comparied to the US$28.90 million average in Q2 2014, which was the highest on record since 2012 when we started to track investment trends.

Alibaba’s successful listing on the NYSE in September 2014 reshaped the world’s perception of the Chinese IT industry and Internet companies. In Q3 2014, the number of investments in the TMT industry hit a new historical high since 2012 when we started to track investment trends. The trend continued into Q4, and the largest ever TMT investment (exceeding US$1 billion) occurred in December. In Q3, investment was mostly concentrated in e-commerce and video sites, while mobile Internet took over the first place in Q4.

PwC Viewpoints

In Q4, the average single deal size was outstanding.

In Q4, the average single deal value was US$15.23 million, an increase of 47% compared from Q3 2014. In the period from 2012 to 2014, Q4 2014 took third place and was only a bit lower than the US$15.82 million average in Q3 2012, which was second place. In Q4 2014, there were eight deals over US$100 million, and the largest single deal was US$1,100 million.


Investments by sector

图Figure 5: Deal volume comparison in TMT sectors 2012-2014行图图图图图图图

200

180

160

140

120

100

80

60

40

20

0Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

92 95

77

66

37

69 6775 74

94

112

190

170

87

75

112 113

40

9478

12 15 10

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9

76 76

6831

67

22

57

4513

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3616

50

48

25

71

60

17

7945

28

75

Telecommunications Technology Internet Entertainment and Media

图Figure 4: Deal value comparison in TMT sectors 2012-2014行行行行行行行

The TMT industry is divided into the following sectors: Technology, Internet, Telecommunications and Mobile, and Entertainment and Media.

Although the average deal size dropped in the second half 2014, the deal volume in Q3 reached 94 deals, which created a new historical high since 2012 when we started to track investment trends. In Q4, the deal volume and size decreased 17% and 43%, respectively, compared to Q3.

The Internet sector has always been the hottest investment area in the TMT industry and was outstandingly successful in 2014. There were 190 deals in Q3, a historical high since 2012 when we started to track investment trends. The deal value of US$19.37 million was just below the historically highest value of US$22.51 million in Q3 2012 (since 2012 when we started to track investment trends). In Q4, the deal volume and value declined by 11% and 19%, respectively, compared to Q3. The Telecommuni-cations and Mobile sector performed well in 2014. In Q4, the deal volume was almost same as Q3 and the deal value saw significant growth of 418% over the previous quarter, which represented a new historical high since 2012 when we started to track investment trends.

In Q4, the deal volume and value of the Entertainment and Media sector declined by 33% and 41% respectively compared to Q3. In Q4 2014, among the eight deals over US$100 million, the Internet sector and the Telecommunications and Mobile sector each accounted for 50% of the total.

The Internet remained the absolute mainstream business in terms of deal volume, but Mobile Internet is already on a par with it for deal size. In particular, Mobile Internet businesses occupied the dominant position in Q4 2014.

Compared to where it was in the first half of 2014, investment in the Technology industry has dropped to a relatively low level, and the Entertainment and Media industry still remained largely ignored.

PwC Viewpoints

6,000

5,000

4,000

3,000

2,000

1,000

0Q1’12

$927

$3,448

$1,578$1,281

$1,167$752

$1,908

$3,449

$2,304

$5,346

$3,535

$4,706

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Telecommunications Technology Internet Entertainment and Media

US$m


Q3 2014Total deal volume for the TMT industry reached 411 deals, with a total value of US$3,535 million.

Figure 7: Deal value in TMT sectors Q3’14 (US$m)

Figure 6: Deal volume in TMT sectors Q3’14

QoQ comparison between Q3 2014

and Q2 2014

Deal volume

Dealvalue

Technology图 135% 64%

Internet图图 118% 22%

Telecommunications and Mobile 49%图图 44%图图

Entertainment

and Media图图图25% 40%

Deal volume by sectors:

Internet: 190 deals, 46% of the total.

Telecommunications and Mobile: 112 deals, 27% of the total.

Technology: 94 deals, 23% of the total.

Entertainment and Media: 15 deals, 4% of the total.

Deal value by sectors:

Internet: US$1,937 million, 55% of the total.

Technology: US$1,001 million, 28% of the total.

Telecommunications and Mobile: US$482 million, 14% of the total.

Entertainment and Media: US$115 million, 3% of the total.

19046%

11227%

9423%

154%

Telecommunications and MobileTechnology

Internet

Entertainment and Media $1,93755%

$1,00128%

$48214%

$1153%


Internet

Entertainment and Media


Deal volume by sector:

Internet: 170 deals, 46% of the total.

Telecommunications and Mobile: 113 deals, 30% of the total.

Technology: 78 deals, 21% of the total.

Entertainment and Media: 10 deals, 3% of the total.

Deal value by sector:

Telecommunications and Mobile: US$2,499 million, 53% of the total.

Internet: US$1,565 million, 33% of the total.

Technology: US$574 million, 12% of the total.

Entertainment and Media: US$68 million, 2% of the total.

Q4 2014Total deal volume for the TMT industry reached 371 deals, with a total value of US$4,706 million.

Figure 8: Deal volume in TMT sectors Q4’14

Figure 9: Deal value in TMT sectors Q4’14 (US$m)

QoQ comparison between Q4 2014 and

Q3 2014

Deal volume

Dealvalue

Technology图 43% 17%

Internet图图 19% 11%

Telecommunications 418%图图 1%图图

Entertainment

and Media图图图41% 33%

$2,49953%

$1,56533%

$57412%

$682%


Internet


17046%

11330%

7821%

103%


Internet



Figure 10: TMT follow-on compared with initial investments 2012-2014

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

65%

51% 53%

67% 67% 63%61%65%

53% 55%

44% 45%

Initial investments Follow-on investments

First-time funding compared with follow-on funding

Q3 2014

There were 196 TMT enterprises engaged in first-round funding, making up 67% of the total number of deals, up 22% compared to Q2 2014. The total investment figure for first-round funding reached US$907 million, representing 26% of the total deal value, 14% higher than Q2 2014.

Q4 2014

In this quarter, 154 TMT enterprises successfully received first-round funding, accounting for 63% of the total deal volume. The percentage was only four points lower than the previous quarter. The total investment figure for first-round funding was US$869 million, representing 19% of the total deal value, down 7% from the previous quarter.


Q3 2014

Enterprises engaged in first-round funding by sector:

Internet: 85 enterprises, funding total of US$419 million.

Technology: 53 enterprises, funding total of US$320 million.

Telecommunications and Mobile: 48 enterprises, funding total of US$161 million.

Entertainment and Media: 10 enterprises, funding total of US$7 million.

For first-round funding, 125 enterprises were at the early stage, accounting for 64%; 61 were at expansion stage, accounting for 31% and 10 were at late stage, accounting for 5%.

Q4 2014

Enterprises engaged in first-round funding by sector:

Internet: 75 enterprises, funding total of US$461 million.

Telecommunications and Mobile: 36 enterprises, funding total of US$149 million.

Technology: 35 enterprises, funding total of US$211 million.

Entertainment and Media: 8 enterprises, funding total of US$48 million.

For first-round funding, 90 enterprises were at the early stage, accounting for 59%; 50 were at the expansion stage, accounting for 32% and 11 were at late stage, accounting for 7% (3 enterprises, accounting for 2%, did not disclose their investment stage).

By comparing the first-round TMT investments and subsequent investments, we find:

1. In Q3 2014, the number of first-round investments increased 62% than Q3 2013, despite a 24% drop in investment value; in Q4, however, the number of first-round investments declined 21%, and investment value also dropped 4% QoQ. In the second half of 2014 overall, first-round investments accounted for over 60% of the total, indicating investors’ bias towards early-stage projects.

2. Of the companies receiving first-round investments, Internet enterprises remained the most popular options among investors, ranking first in terms of both volume and value and well ahead of the other three segments.

3. During the past three years (except the first half of 2014), TMT companies receiving first-round investments outnumbered those in later investment stages, which is clear evidence of the rapid replacement rate in the TMT industry.

53

48

85 10

75

35

36 8

PwC Viewpoints

Q3 2014

First-time funding summary (US$)

Number of enterprises

<= 1m 47

1m-5m 69

>5m-10m 25

>10m 22

N/A 33

Q4 2014

First-time funding summary (US$)

Number of enterprises

<= 1m 29

1m-5m 50

>5m-10m 32

>10m 20

N/A 23


Investments by stage of development

Figure 11: TMT investments by stage of development 2012-2014 (Deal value)

PIPE

6,000

5,000

4,000

3,000

2,000

1,000

0

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

$927

$1,577

$3,448

$1,281 $1,164$752

$1,901

$3,449

$2,304

$5,346

$3,535

$4,706

Early stageLate stage Expansion stage

US$m

Figure 12: TMT investments by stage of development 2012-2014 (Deal volume)

300

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0

106

100

3141

53

124

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64

95

71

105

5668

22

131 131145

9775

22 15 20 16

10

56 88

116

266 259

132

2321

8 6 6 518

26

3

81

109

10

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98

7

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

3

56

PIPEEarly stage Late stageExpansion stage

The deal volume and value for early-stage investments reached a historical high level since 2012.

In the four stages of investment, the deal volume for early-stage investments took the lead as usual, accounting for 65% and 70%, respectively, of the total in Q3 and Q4 2014. Meanwhile, the total deal value was rising and saw a significant growth compared to previous years. In Q4 2014, early-stage investments reached US$2,321 million, accounting for 49% of the total, a historic high since 2012 when we started to track investment trends.

The expansion stage reached historic levels since 2012 in Q3 and Q4 2014.

The expansion stage is also an attractive stage for investors. In Q3 and Q4, the deal volume and value of expansion-stage investments were second to early-stage investments. Q3 and Q4 expansion-stage deal values were US$2,081 million and US$2,145 million, respectively, a record since 2012 when we started to track investment trends.

The late stage was less attractive to investors.

Enterprises at the late stage might be expected to be the most popular since they are closest to an exit. However, deal volume at this stage has always been lower than that at the expansion stage. Because of limited deal volume, deal value was even smaller than that of the early stage. Thanks to clear business models, investors have a better idea of the prospects for TMT companies at this stage, so their investment decisions are more considered.

PIPE investment amount significantly decreased in Q3 and Q4 after the unprecedented growth in Q2 2014.

In Q2 2014, the deal value of PIPE investments reached US$2,920 million, but the total in Q3 and Q4 was only US$700 million. The deal value was even less than a quarter of that in Q2. Overall, the deal volume of PIPE investments was low and fell further in the second half of 2014.


Q3 2014

Q3 2013 saw a total volume of 411 deals in the TMT industry, with a total deal value of US$3,535 million.

Deal volume by stage of development

Early stage: 266 deals, 65% of the total.

Expansion stage: 116 deals, 28% of the total.

Late stage: 20 deals, 5% of the total.

PIPE: 6 deals, 1% of the total.

Undisclosed: 3 deals, 1% of the total

Figure 13: Deal volume in TMT industry by stage of development Q3’14

26665%

11628%

31% 6

1%205%

PIPE

Early stage

Late stageExpansion stage

Undisclosed

Figure 14: Deal value in TMT industry by stage of development Q3’14 (US$m)

$2,08159%

$68619%$583

16%

$1845%

$11%

PIPE

Early stage


Undisclosed

Deal value by stage of development

Expansion stage: US$2,081 million,59% of the total.

Early stage: US$686 million, 19% of the total.

PIPE: US$583 million, 16% of the total.

Late stage: US$184 million, 5% of the total.

Undisclosed: US$1 million, 1% of the total.

QoQ comparison between Q3 2014 and Q2 2014

Deal volume

Deal value

Early stage 102% 25%

Expansion

stage107% 64%

Late stage 33% 22%

PIPE 40% 80%


Q4 2014

There was a total volume of 371 deals in the TMT industry, with a total deal value of US$4,706 million. The highest single deal value was US$1,100 million in the expansion stage. (Three deals did not disclose their investment stage.)

Figure 15: Deal volume in TMT industry by stage of development Q4’14

25970%

8824%

164%

31%

51%

PIPE

Early stage


Undisclosed

Figure 16: Deal value in TMT industry by stage of development Q4’14 (US$m)

Deal volume by stage of development

Early stage: 259 deals, 70% of the total.

Expansion stage: 88 deals, 24% of the total.

Late stage: 16 deals, 4% of the total.

PIPE: 5 deals, 1% of the total.

Undisclosed: 3 deals, 1% of the total.

Deal value by stage of development

Early stage: US$2,321 million, 49% of the total.

Expansion stage: US$2,145 million, 46% of the total.

PIPE: US$118 million, 2% of the total.

Late stage: US$116 million, 2% of the total.

Undisclosed: US$6 million, 1% of the total.

QoQ comparison between Q4 2014 and Q3 2014

Deal volume

Deal volume

Early stage期 3% 238%

Expansion

stage期期24% 64%

Late stage期 20% 37%

PIPE 17% 80%

$2,32149%

$2,14546%$118

2%

$61%

$1162%

PIPE

Early stage


Undisclosed


Investments by region

In Q3 and Q4 2014, 482 deals gave details on the regions where investments took place. The top five investment regions in China in the TMT industry were, by deal volume, Beijing with 249 (accounting for 52% of the total deal volume), Shanghai with a modest 87, Shenzhen with 48, Zhejiang Province, with 22 and Guangdong Province (except Shenzhen) with 18. The total deal volume of the top five regions was 421, accounting for 88% of the total.

Figure 17: The top five regions for TMT investments in Q3/Q4 2014 (Deal volume/Deal value)

249

87

48

22

15

$5,313

$400

$290

$420

$157

18 $101

0 1,000 3,000 4,000 6,0005,0002,000Deal volume

US$m

Beijing

Shanghai

Shenzhen

Zhejiang Province

GuangdongProvince

JiangsuProvince

Beijing has established itself as the heartland of China’s TMT industry, generating half of the total volume of TMT investment and claiming 61% of the national aggregate investment. The city boasts advantages in human resources, funding and policy for start-ups in the TMT industry. A virtuous cycle has taken shape. Its leading position will not be in danger from any other Chinese city in the foreseeable future.

In 2014, Guangdong Province and Jiangsu Province almost tied for the fifth place. Jiangsu Province had a higher investment size compared to Guangdong Province, but Jiangsu Province fell behind slightly in terms of number of investments.

Total deal value of investments which disclosed their region was US$6,963 million. From the perspective of deal value, the top four rankings had no change. Jiangsu Province surpassed Guangdong Province (except Shenzhen) and ranked fifth. The top five regions had an aggregated deal value of US$6,580 million, accounting for 95% of the total deal size. Beijing took the top spot with an impressive sum of US$5,313 million, followed by Shanghai which was US$420 million.

PwC Viewpoints

Shenzhen was third, with US$20 million less than Shanghai. The combined total of the remaining two regions, Jiangsu and Zhejiang Province, was US$448 million.


Exits by quarter

3. PE/VC exits in the TMT industry

In 2014 TMT exit volume hit a record high since 2012.

In Q3 2014, there were only 16 exits. One quarter later, the number rose to 18. There were 73 exits in 2014, 63 exits in 2012 and only 43 exits in 2013. In general, the total amount of exits in 2014 was the highest in the past three years.

Figure 18: Exit volume in the TMT industry 2012-2014

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610

1713

10

1623

16 18

A-share IPOs resumed in January 2014. In the first half of the year, 21 Chinese TMT companies launched IPOs. In Q3 2014, IPOs accounted for 50% of TMT investor exits; the figure dropped to 39% in Q4. With the dropping percentage among exits, IPO is no longer the most favorable choice for TMT enterprises. Furthermore, secondary offerings between PE funds turned out to be weaker than expected.

By contrast, M&As replaced IPOs as the most popular exit channel and accounted for 61% of the total. M&A deals proliferated among TMT businesses. This is attributable to the extremely lengthy IPO process as well as the influence of behind-the-scene investors. However, given the high valuations on the New Third Board and A shares, we expect more TMT companies will choose A-share or New Third Market IPOs as their exit channel in the future.

PwC Viewpoints


At the beginning of 2014, due to the restart of the A-share market in China and the confidence rebuilt in the American capital market, IPOs rose dramatically to 63% of all exits, a new high since the second half of 2012. However, from the beginning of the second half of 2014, driven by capital and the consideration of enhancing competitiveness, a large wave of M&A began.

Exits by type

Figure 19: TMT exit trends by type 2012-2014

IPO

25

20

15

10

5

0

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

1

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4

Strategic sale Management buy-out Secondary sale

M&A accounted for 61% of total exits in Q4 2014, overtaking the volume of IPOs.

Management buy-out and secondary sale represented a small percentage, around 10%, of the total exits. There was only one buy-out and one secondary sale in Q3 and none in Q4.


In Q3 2014, there were 16 exits in total.

IPO: 8 exits, 50% of total.

Strategic sale: 6 exits, 38% of the total.

Management buy-out: 1 exit, 6% of the total.

Secondary sale: 1 exit, 6% of the total.

Figure 21: Exit types in the TMT industry Q3’14

850%

16%

16%

638%

IPOStrategic saleManagement buy-outSecondary sale

Figure 22: Exit types in the TMT industry Q4’14

In Q4 2014, there were 18 exits in total.

Strategic sale: 11 exits, 61% of the total.

IPO: 7 exits, 39% of total.

Figure 20: Comparison of TMT exits in mainland China, Hong Kong and US capital markets 2012-2014

Q2’13

100%

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13

0%12%

88% 84%

100% 100%

Q3’13 Q4’13 Q1’14 Q2’1450%

43%

57% 90%

10%

64%

27%9%

Q4’14Q3’14

64%

27%9%

8%

50% 57%

29%14%25%25%

Mainland China Hong Kong

One IPO occurred on the Frankfurt Stock Exchange, accounting for 8% of the total in in Q2'12.

US

It was not a peak time for Chinese TMT companies to list on the US exchanges. IPOs in mainland China are still attractive to local TMT companies.

Since 2012 when we started to track investment trends, there’s been a trend of local TMT enterprises listing in the US. The main reasons were simpler procedures, higher liquidity levels, and no rigorous restriction to profitability. Thus, US-listed local TMT enterprises reach a record high number in Q2 2014 since 2012. However, the Internet subsector as the representative of new

technology and business models, profoundly changed the traditional industry of China and China’s capital market began to give higher valuations to the TMT industry and thus encouraged more and more enterprises to list in mainland China. Therefore, China capital markets became more attractive to investors.

In Q3 2014, 50% of TMT companies listed domestically and the remaining half listed in either Hong Kong or the US.

In Q4 2014, only 14% of listings were on NASDAQ and NYSE, while 29%

listed in Hong Kong and 57% listed in mainland China.

The US markets are not necessarily the first choice. When the situation for domestic stock market is favorable, TMT companies prefer to list in mainland China.

Most TMT companies chose to list on the ChiNext Board in Shenzhen or the Shanghai Stock Exchange.

1161%

739%

IPOStrategic sale


The Internet sector saw more investments, but exits steadily declined in Q3 2014.

The Internet as an active TMT industry sector was booming in both Q3 and Q4. The deal volume and deal value of the Internet sector ranked highest among the four sectors. After the peak in Q2, stable fluctuations were seen in Q3 and Q4.

In Q4 2014, M&A overtook IPO as the main means of exiting for many reasons. M&A allowed the Internet sector to obtain core technologies, to greatly expand its users, to promote industrial diversification and to achieve new profit growth. In addition, M&A also could help enterprises to realize the integration of online and traditional industries. It was a pathway to embedding Internet into traditional industries. With the ongoing development of China’s Internet companies, we expect that M&A activity will remain high.

Exits by sectorQ3 2014

Technology: 11 exits, 68% of the total.

Internet: 3 exits, 19% of the total.

Telecommunications and Mobile: 2 exits, 13% of the total.

Entertainment and Media: No exits in Q3 2014.

Q4 2014

Technology: 7 exits, 39% of the total.

Internet: 5 exits, 28% of the total.

Telecommunications and Mobile: 4 exits, 22% of the total.

Entertainment and Media: 2 exits, 11% of the total.

Figure 23: IPO exits in the TMT industry 2012-2014

14

12

10

8

6

4

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Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

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Technology Internet Telecommunications and Mobile Entertainment and Media


4. Sector focus: Technology, Internet, and Telecommunications and Mobile

Investments in Technology

The Technology sector includes IT Services, Hardware, Software, Electronics & Optoelectronics Devices and Semiconductors.

Figure 24: Deal value in the Technology sector 2012-2014

3,000

2,500

2,000

1,500

1,000

500

0Q1’12

$239$383

$501 $485

$128$230

$840

$1,568

$2,813

$218

$1,001

$574

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Hardware

Semiconductor

IT Services

Software

Electronics & Optoelectronics Devices

US$m

The deal value of Technology sector investments rapidly increased in Q3, hitting a historical high since 2012.

In Q2, the deal value saw a significant increase. The main reason was that a listed Electronics & Optoelectronics Devices supplier obtained a PIPE investment worth US$1,800 million and a listed Semiconductor producer acquired a PIPE investment of nearly US$700 million, both of which increased the overall deal value. In Q3, there were no large single deals, so total deal value sharply dropped. However, the deal volume in Q3 still rose and hit a historical high since 2012 when we started to track investment trends.

In the second half of 2014, investment in the Hardware subsector reached record high since

The Semiconductor subsector performed well, seeing the highest value.

The Semiconductor subsector performed very well in Q4. It was the best performance up to now excluding a huge PIPE investment in Q4 2012. There were only two deals in Q4, but the average deal size was US$34 million. It was on the top of the list of the five subsectors in the Technology sector.

Investments in the IT Services and Software subsectors were positive and reached new historical records.

The IT Services and Software subsectors were a focal point for technology investments in the second half of the year. Except for 31 deals in Q1 2012, in the second half of 2014 the deal volume reached a new historical record since 2012 when we started to track investment trends, while deal value was just second to the historical highest point since 2012. Investment in the IT Services and Software subsectors grew rapidly in Q3 and Q4 2014 (excluding three huge PIPE investments in Q4 2013).

Figure 25: Deal volume in the Technology sector 2012-2014

35

30

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10

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Q1’12

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1

Hardware SemiconductorIT Services

SoftwareElectronics & Optoelectronics Devices

2012 due to several large individual deals which drove the total higher.

Prior to the second half of 2014, deal volume for the Hardware subsector was typically in the single digits. In Q3, there were 15 deals in the Hardware subsector, a historical high volume since we began tracking investment trends in 2012. In addition, the Hardware subsector surpassed the Semiconductor subsector for the first time, moving up from its bottom position.


Deal volume and value

Q3 2014

There were 94 deals in the Technology sector, with a total value of US$1,001 million.

IT Services: 27 deals, 29% of the total; deal value of US$190 million, 19% of the total.

Software: 26 deals, 28% of the total; deal value of US$586 million, 59% of the total.

Electronics & Optoelectronics Devices: 21 deals, 22% of the total; deal value of US$189 million, 19% of the total.

Hardware: 15 deals, 16% of the total, deal value of US$ 23 million, 2% of the total.

Semiconductor: 5 deals, 5% of the total; deal value of US$13 million, 1% of the total.

Figure 26: Deal volume by Technology subsector Q3’14

Figure 27: Deal value by Technology subsector Q3’14 (US$m)


Q2 2014

Deal volume

Deal value

Electronics &

Optoelectronics

Devices

62% 90%

Software 73% 544%

IT Services 286% 135%

Semiconductor期 150% 98%

Hardware 400% 475%

2729%

1516%

55%

2628%

2122%

HardwareSemiconductor

IT Services Software


$58659%

$232%

$131%

$19019%

$18919%

HardwareSemiconductor

IT ServicesSoftware




Q4 2014

There were 78 deals in the Technology sector, with a total value of US$574 million.

Software: 26 deals, 33% of the total; deal value of US$195 million, 34% of the total.

IT Services: 23 deals, 29% of the total; deal value of US$154 million, 27% of the total.

Electronics & Optoelectronics Devices: 16 deals, 21% of the total; deal value of US$108 million, 18% of the total.

Hardware: 11 deals, 14% of the total, deal value of US$ 49 million, 9% of the total.

Semiconductor: 2 deals, 3% of the total; deal value of US$68 million, 12% of the total.

Figure 28: Deal volume by Technology subsector Q4’14

Figure 29: Deal value by Technology subsector Q4’14 (US$m)


Q3 2014

Dealvolume

Deal value

Electronics & Optoelectronics Devices 期期期期期

24% 43%

Software — 67%

IT Services期期 15% 19%

Semiconductor 期期 60% 423%

Hardware 27% 113%

2633%

23%

2329%

1621%

1114%

Hardware

Semiconductor

IT ServicesSoftware


$19534%

$6812%

$10818%

$499%

$15427%

Hardware

Semiconductor

IT ServicesSoftware




The attraction of early-stage investments continued to rise.

From the beginning of Q2 2014, the deal volume at the early stage preceded other investment stages. The deal value for the early stage in Q4 2014 rose 260% QoQ and reached its highest level on record since 2012 when we started to track investment trends. There was one deal in Hardware and one in Software. The deal values were US$35 million and US$50 million, respectively, ranking in the top three deals for the Technology sector.

Expansion and late stages were still popular for investment.

The deal volume at the expansion and late stages continued to rise in the second half of 2014. In terms of deal value, the total at the expansion stage increased and the late stage remained stable in the second half of 2014. In Q4, the highest single deal was in the expansion stage in the Semiconductor subsector, at about US$56.99 million.

Figure 30: Deal value by stage of development in the Technology sector 2012-2014

3,500

3,000

2,500

2,000

1,500

1,000

500

0

PIPE

Q1’12

$314 $382$526 $485

$125$230 $218

$571

$2,813

$1,001$848

$1,583

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Early stageExpansion stageLate stage

US$m

Figure 31: Deal volume by stage of development in the Technology sector 2012-2014

40

35

30

25

20

15

10

5

0

Q1’12

2

17

27

3336

27

38

21

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1

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Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

PIPE

16

2018

10

37

31

Early stageExpansion stage Late stage

PIPE investments cooled

PIPE investments bottomed out from Q4 2013 and remained low through Q2 2014. However, a PIPE investment of about US$57 million in the Application Software subsector in Q3 was the highest deal in the quarter. Q4, however, was much lower, with PIPE deal value dropping 94% QoQ.



Q3 2014

Early stage: 40 deals, 43% of the total; deal value of US$58 million, 6% of the total.

Expansion stage: 37 deals, 39% of the total; deal value of US$286 million, 29% of the total.

Late stage: 10 deals, 11% of the total; deal value of US$84 million, 8% of the total.

PIPE: 5 deals, 5% of the total; deal value of US$573 million, 57% of the total.

Undisclosed: 2 deals, 2% of the total.

Figure 32: Deal volume by stage of development in the Technology sector Q3’14

Figure 33: Deal value by stage of development in the Technology sector Q3’14 (US$m)

Q4 2014





Undisclosed: 1 deal, 1% of the total; value of US$3 million, 1% of the total.

Figure 34: Deal volume by stage of development in the Technology sector Q4’14

Figure 35: Deal value by stage of development in the Technology sector Q4’14 (US$m)


and Q2 2014

Deal volume

Deal value


Expansion

stage图270% 303%

Late stage 150% 20%

PIPE 17% 78%


and Q3 2014

Deal volume

Deal value


Expansion

stage图16% 11%

Late stage 20% 15%

PIPE 60% 94%

$848%

$586%

$57357%

$28629%

PIPE

Early stage

Expansion stage

Late stage

4043%

55%

22%

3739%

1011%

PIPEEarly stageExpansion stage

Late stageUndisclosed

3646%

23%

11%

3140%

810%

PIPEEarly stage Expansion stageLate stageUndisclosed

$25444%

$31%

$20936%

$7112%

$377%

PIPEEarly stageExpansion stage

Late stageUndisclosed



During the second half of 2014, the top three regions with the highest deal volume and greatest deal value in the Technology sector were, in descending order, Beijing, Shanghai, and Shenzhen. Beijing took the top spot, with 16 deals totaling US$134 million. Shanghai had nine deals, totaling US$58 million. Shenzhen had eight deals totaling US$67 million.

Figure 36: The top three regions for Technology investments Q3/Q4’14 (Deal volume/Deal value)

16 $134

9 $58

8 $67

0 100 20050 150

US$m

Deal volume

Beijing

Shanghai

Shenzhen

Beijing leading other regions.

Beijing’s deal volume and value equaled the sum of the other two regions.

Investment in Beijing focused on the Software and IT Services subsector, which accounted for 99.8% of the total.

Total deal value of Shanghai increased due to a high value PIPE investment.

Shanghai ranked third in Q4 2014. The main reason was that one Electronics & Optoelectronics Devices subsector company received an investment of US$34.31 million in Q4 2014, which lifted the overall deal value.


The E-commerce subsector took the lead in terms of deal value in 2014, surpassing the total deal value for 2012 and 2013.

Among the Internet sector, investors pursued opportunities in the E-commerce subsector with great passion. In Q3 2014, there were 80 deals representing a historical high since 2012 when we started to track investment trends. In terms of deal value, it reached US$21.21 million in the second half of 2014, surpassing the total for 2012 and 2013.

There were nine deals in the Internet sector exceeding US$100 million, six in the E-commerce subsector. The biggest deal size was US$350 million.

In Q3, deal value in Internet Marketing was over US$300 million, which created a new record.

Figure 37: Deal value in the Internet sector 2012-2014

Investments in Internet

The Internet sector includes E-commerce, Online Education, Internet Services, Online Entertainment, Social Media, Internet Marketing and Internet Finance.

2,500

2,000

1,500

1,000

500

0Q1’12

$325$526

$2,230

$185

$888

$380$504

$605

$1,468$1,587

$1,937

$1,565

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

E-commerceInternet Services

Internet Marketing Social Media

Online Education

Online EntertainmentInternet Finance

US$m

Figure 38: Deal volume in the Internet Sector 2012-2014

70

80

60

50

40

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0Q1’12

49 47

5561

21

48

1039

80

1723

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Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

14 14

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24

5

17 1720

27 29

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4 448 8

5 6 62 3 3

11 11

23

3129

6753 1 3411

147

10

1

18 18 19

4 4910

7 7713

E-commerce Internet Services

Internet MarketingSocial Media

Online Education Online Entertainment

Internet Finance

Internet Marketing mainly consisted of consulting firms, advertising agencies and organizations of network marketing services. There were 19 deals in Internet Marketing in Q3 and total deal value was US$347 million.

Deal value for the Internet Services, Online Education and Social Media subsectors reached a new high since 2012 when we started to track investment trends, while the average single deal size still remained low.

The deal volume in Internet Services increased significantly in the second half of the year compared to last year. In Q4 Internet Services hit a record high since 2012 when we started to track investment trends, with US$248 million in investments, 47% going to the Online Travel Services subsector. However as a whole, the average single deal size was still low, with the biggest one US$50 million.

In Q4 Online Education hit a historical high of US$117 million in deal value since 2012 when we started to track investment trends. The main reason

for this was that one well-known Online Education website secured a single investment of US$55 million.

In Q3 Social Media hit a new historical record of US$202 million in deal value and also hit a historical high in deal volume in Q4. Yet the average single deal value was low. The main reason for this was the high degree of monopoly in Social Media. The market

is comprised of several large, well-known social websites, thus the popularity gained and the numbers of users registered were limited. Even if a company received investment, the deal value was relatively low, only between tens of thousands and millions of dollars.



Q3 2014

There were 190 deals in the Internet sector, with a total value of US$1,937 million.

E-commerce: 80 deals, 42% of the total; deal value of US$943 million, 49% of the total.

Internet Services: 55 deals, 29% of the total; deal value of US$224 million, 12% of the total.

Internet Marketing: 19 deals, 10% of the total; deal value of US$347 million, 17% of the total.

Online Education: 18 deals, 9% of the total; deal value of US$110 million, 6% of the total.

Online Entertainment: 11 deals, 6% of the total; deal value of US$111 million, 6% of the total.

Social Media: 7 deals, 4% of the total; deal value of US$202 million, 10% of the total.

Internet Finance: No deals in Q3 2014.


Q2 2014

Deal volume

Dealvalue

E-commerce 105% 6%

Online Education 350% 33%

Internet Services 224% 76%

Online Entertainment

22% 41%

Social Media 0% 461%

Internet Marketing 90% 277%

Internet Finance 图图 100% 100%

Figure 39: Deal volume by Internet subsector Q3’14

Figure 40: Deal value by Internet subsector Q3’14 (US$m)

8042%

189%

116%

74%

5529%19

10%

E-commerce Internet ServicesInternet Marketing

Social Media


$34717%

$94349%

$116%$116%

$20210%

$22412%

E-commerceInternet Services

Internet MarketingSocial Media




Q4 2014


E-commerce: 61 deals, 36% of the total; deal value of US$1,078 million, 69% of the total.

Internet Services: 48 deals, 28% of the total; deal value of US$248 million, 16% of the total.

Internet Marketing: 17 deals, 10% of the total; deal value of US$57 million, 4% of the total.

Online Entertainment: 6 deals, 4% of the total; deal value of US$27 million, 1% of the total.

Social Media: 14 deals, 8% of the total; deal value of US$33 million, 2% of the total.

Online Education: 21 deals, 12% of the total; deal value of US$117 million, 7% of the total.

Internet Finance: 3 deals, 2% of the total; deal value of US$5 million, 1% of the total.

Figure 41: Deal volume by Internet subsector Q4’14

Figure 42: Deal value by Internet subsector Q4’14 (US$m)


Q3 2014

Deal volume

Dealvalue

E-commerce 24% 14%

Online Education 17% 6%

Internet Services 13% 11%


45% 76%

Social Media 100% 84%

Internet Marketing 11% 84%

Internet Finance 图图 3000% 5000%

6136%

1710%

148%

64%

32%

4828%

2112%


Social MediaOnline Education

Online EntertainmentInternet Finance

$24816%

$1,07869%

$51%

$271%

$1177%

$332%

$574%


Social MediaOnline Education


Internet Finance


Early-stage investment ranked first, with sharply rising deal values.

In terms of deal volume, Internet investments accounted for 67% of the total in Q3 and 75% of the total in Q4. It was the leading sector due to the strong demand for funding from early-stage enterprises.

Deal value in the early-stage companies grew by leaps and bounds in the second half of 2014. The figure rose 42% in Q3 and 138% in Q4 QoQ. There were three E-commerce investments over US$100 million, breaking the traditional barrier of low average deal values in this stage.

Figure 43: Deal value by stage of development in the Internet sector 2012-2014

Figure 44: Deal volume by stage of development in the Internet sector 2012-2014

Deal value at the expansion stage accounted for 76% of the total and hit a historical high (since 2012) with US$1,400 million.

In Q3, expansion-stage investments rose significantly in terms of both deal value and volume. There were five deals exceeding US$100 million. Three of them were in E-commerce sector worth US$460 million and two were in Internet Marketing and Social Media sectors with US$200 million and US$189 million, respectively.

2,500

2,000

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1,000

500

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PIPE

Q1’12

$325$526

$2,151

$1,468$1,587

$1,937

$1,563

$189

$888

$381$501

$679

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Expansion stageLate stage Early stage

US$m

140

120

100

80

60

40

20

0Q1’12

43 4135

49

37 3842

18

51

64

30

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37

3938

4 9 9 36275

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5 5

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319

3616

1

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75

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

PIPE

0 0 0 1 10 2 21

48

128 127

Expansion stage Late stageEarly stage



Q3 2014



Expansion stage: 52 deals, 27% of the total; deal value of US$1,463 million, 76% of the total.


PIPE: 1 deal, 1% of the total; deal value of US$10 million, 1% of the total.

Figure 45: Deal volume by stage of development in the Internet sector Q3’14

Figure 46: Deal value by stage of development in the Internet sector Q3’14 (US$m)）

Q4 2014

There were 170 deals in total in the Internet sector, with a total value of US$1,565 million. (There was one deal of US$2 million that did not reveal its investment stage.)



Late stage: 3 deals, 2% of the total; deal value of US$0.5 million, 0% of the total.



and Q2 2014

Deal volume

Deal value


Expansion stage

73% 42%

Late stage 50% 36%

PIPE 50% 93%


and Q3 2014

Deal volume

Deal value

Early stage 1% 138%

Expansion stage

29% 57%

Late stage 67% 100%

PIPE 100% 500%

Figure 47: Deal value by stage of development in the Internet sector Q4’14 (US$m)

Figure 48: Deal value by stage of development in the Internet sector Q4’14 (US$m)

12867%

5227%

11% 9

5%

Expansion stage

Late stage

Early stage

PIPE

$36618%

$1,46376%

$985%

$101%

Expansion stage

Late stage

Early stage

PIPE

12775%

21%

3722%

32%

Expansion stageLate stage

Early stage

PIPE$604%

$87156%

$63140%

Expansion stageEarly stage

PIPE



During Q3 and Q4 2014, the top three regions in the Internet sector were, in descending order, Beijing, 58 deals with a deal value of US$953 million; Shanghai, 19 deals with a total investment sum of US$79 million; Shenzhen, seven deals with a total investment sum of US$102 million; and Guangdong, also with seven deals with a total investment sum of US$41 million. Shenzhen and Guangdong tied for third by deal volume.

Figure 49: The top three regions for Internet sector investments in Q3/Q4’14 (Deal volume/Deal value)

58 $953

7 $41

7 $102

19 $79

0 400200 800600 1,000Deal volume

Beijing

Shanghai

Shenzhen

Guangdong Province

US$m


Investments in Telecommunications and MobileThe Telecommunications and Mobile sector includes Telecom Equipment and Terminals, Other Telecommunications Subsectors and Mobile.


Q3 2014

The total number of deals in the Telecommunications and Mobile sector was 112, with a total value of US$482 million.

Mobile: 112 deals, 100% of the total; deal value of US$482 million, 100% of the total.

Telecom Equipment and Terminals: No deals in Q3 2014.

Other Telecommunications Sectors: No deals in Q3 2014.

Figure 48: Deal volume by subsegment in the Telecommunications and Mobile sector Q3’14

112100%

Mobile

Figure 49: Deal value by subsegment in the Telecommunications and Mobile sector Q3’14 (US$m)

$482100%

Mobile

Mobile, the pillar of the Telecommunications sector, saw unprecedented investment in Q4 2014.

The small, light and convenient smartphone brought a wave of the mobile to all aspects of society. It also increased investments in smartphone platforms in the Mobile sector.

In Q4 2014, the investments of Mobile reached historical highs since 2012 when we started to track the investment trend with an unprecedented US$1,386 million in investments and a single deal valued at US$700 million.

Other Telecommunications Subsectors only had one deal in 2014.

The deal volume of this sector had never surpassed 10 deals before and the deal value was also historically low. The highest recorded in history was only US$270 million in Q4 2012 since 2012 when we started to track investment trends.

There was only one deal in Other Telecommunications Subsectors in 2014 and the deal value was not disclosed.

Telecom Equipment and Terminals: There was one huge deal in Q4 2014 which was rarely seen in recent years.

Telecom Equipment and Terminals made significant progress in Q4 2014 with US$1,113 million in investment. The figure was far more than the previous record of US$259 million since 2012 when we started to track investment trends. A Terminals enterprise received a US$1,100 million investment in Q4 which was the main reason for the huge increase for the Telecom Equipment and Terminals subsector.



and Q2 2014

Deal volume

Dealvalue

Mobile 51% 44%

Telecom Equipment and Terminals

100% 100%

Other Telecommunications Subsectors 期期

N/A N/A

Q4 2014

There were a total of 113 deals in the Telecommunications sector, with a total value of US$2,499 million.

Mobile: 109 deals, 96% of the total; deal value of US$1,386 million, 55% of the total.

Telecom Equipment and Terminals: 3 deals, 3% of the total; deal value of US$1,113 million, 45% of the total.

Other Telecommunications Subsectors: 1 deal, 1% of the total; deal value undisclosed.

Figure 52: Deal volume by subsectors in the Telecommunications sector Q4’14

Figure 53: Deal value by subsectors in the Telecommunications sector Q4’14(US$m)


and Q3 2014

Dealvolume

Dealvalue

Other Telecommunications Subsectors

1000% N/A


3000% 111,300%

Mobile 3% 188%

10996%

11%

33%

Mobile


Other Telecommunications Subsectors

$1,38655%

$1,11345%

Mobile




Q3 2014



Late stage: 1 deal, 1% of the total; deal value of US$2 million, 0.5% of the total.

PIPE: No deals in Q3 2014.

Undisclosed: 1 deal, 1% of the total; deal value of US$1 million, 0.5% of the total.

Q4 2014

Early stage: 94 deals, 83% of the total; deal value of US$1,240 million, 50% of the total.

Expansion stage: 15 deals, 13% of the total; deal value of US$1,239 million, 49% of the total.


Undisclosed: 1 deal, 1% of the total; deal value of US$1 million, 0% of the total.

Figure 54: Deal volume by stage of development in the Telecommunications sector Q3’14

Figure 56: Deal volume by stage of development in the Telecommunications sector Q4’14

Figure 55: Deal value by stage of development in the Telecommunications sector Q3’14 (US$m)

Figure 57: Deal value by stage of development in the Telecommunications sector Q4’14 (US$m)

9181%

1917%

11% 1

1%

Early stage Expansion stage

Late stage Undisclosed

$10.5%

$20.5%

$27256%

$20743%

Early stage Expansion stageLate stage Undisclosed

9483%

11%

33%

1513%

Early stage Expansion stageLate stage Undisclosed

$191%

$1,24050%

$1,23949%

Early stage Expansion stageLate stage


and Q2 2014

Deal volume

Deal value

Early stage 60% 58%

Expansion stage

46% 86%

Late stage 67% 83%

PIPE 100% 100%


and Q3 2014

Deal volume

Deal value

Early stage 3% 499%

Expansion stage

21% 356%

Late stage 200% 850%



During Q3 and Q4 2014 in the Telecommunications and Mobile sector, Beijing took the top spot with 39 deals valued at US$1,997 million. Shanghai took second place with a deal volume of 16. There were six deals in Zhejiang, five deals in Shenzhen and four deals in Sichuan. From a deal size perspective, Zhejiang ranked second, with a deal value of US$232 million. Shanghai came third with a total of US$39 million. The largest single deal was US$1,100 million provided to a well-known Mobile enterprise in Beijing.

Figure 58: The top five regions for investment in the Telecommunications sector Q3/Q4’14 (Deal volume/Deal value)

39 $1,997

6

4

$232

5 $8

$19

16 $39

0 500 2,0001,5001,000

Beijing

Shanghai

Shenzhen

Zhejiang Province

JiangsuProvince

Deal volume

US$m


The Mobile subsector includes Mobile Entertainment, Mobile Advertising, Mobile Shopping, Mobile Healthcare, Mobile Technology, Mobile Education, Mobile Services, Mobile Social Media, Mobile Finance and Mobile Messaging.

5. A close look at investments in Mobile

MobileShopping

Mobile

MobileEntertainment Mobile

Technology

Mobile Finance

Mobile Services(Including Mobile TravelServices, Mobile Housekeeeping Services)

Mobile Messaging

Education

Mobile Social Media

Mobile Advertising

Mobile Healthcare

(Including Mobile Video, Mobile Music, Mobile Gaming, etc)



Q3 2014

The total number of deals in the Mobile subsector was 112, with a total value of US$482 million. (18 deals did not disclose their subsector; they had a total deal value of US$40 million.)

Figure 59: Deal value by Mobile Internet subsegments 2012-2014

Mobile Entertainment: 31 deals, 28% of the total; deal value of US$141 million, 29% of the total.

Mobile Services: 20 deals, 18% of the total; deal value of US$131 million, 27% of the total.

Mobile Social Media: 12 deal, 11% of the total; deal value of US$45 million, 10% of the total.

Mobile Advertising: 10 deals, 9% of the total; deal value of US$29 million, 6% of the total.

Mobile Technology: 3 deals, 3% of the total; deal value of US$5 million, 1% of the total.

Mobile Education: 6 deals, 6% of the total; deal value of US$3 million, 1% of the total.

Mobile Healthcare: 4 deals, 3% of the total; deal value of US$57 million, 12% of the total.

Mobile Messaging: 4 deals, 3% of the total; deal value of US$25 million, 5% of the total.

Mobile Shopping: 4 deal, 3% of the total; deal value of US$6 million, 1% of the total.

Mobile Finance: No deals in Q3 2014.

1,400

1,200

1,000

800

600

400

200

0Q1’12

$59

$214

$94 $85 $67 $76

$197 $177

$448 $482

$861

$1,386

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Mobile Entertainment

Mobile Advertising Mobile Shopping Mobile Healthcare

Mobile TechnologyMobile Education

Mobile Services Mobile Social MediaMobile FinanceMobile Messaging

US$m



Q4 2014

The total number of deals in the Mobile subsector was 109, with a total value of US$1,386 million. (18 deals did not disclose their subsector; they had a total deal value of US$91 million.)

Mobile Entertainment: 23 deals, 21% of the total; deal value of US$62 million, 4% of the total.

Mobile Services: 29 deals, 27% of the total; deal value of US$987 million, 71% of the total.

Mobile Social Media: 14 deals, 13% of the total; deal value of US$36 million, 3% of the total.

Mobile Technology: 8 deals, 7% of the total; deal value of US$61 million, 4% of the total.

Mobile Advertising: 5 deals, 5% of the total; deal value of US$35 million, 3% of the total.

Mobile Education: No deals in Q4 2014.

Mobile Finance: No deals in Q4 2014.

Mobile Shopping: 9 deals, 8% of the total; deal value of US$14 million, 1% of the total.

Mobile Healthcare: 3 deals, 3% of the total; deal value of US$100 million, 7% of the total.

Mobile Messaging: No deals in Q4 2014.

The Mobile Services, Mobile Entertainment and Mobile Healthcare were the three pillars of the Mobile subsector.

Mobile services: Ranking first, with taxi-hailing apps playing the leading role.

In the second half of 2014, taxi-hailing apps continued to be the major investment in the Mobile Services subsector. In Q4, two well-known taxi-hailing apps companies respectively obtained US$100 million and US$700 million investments. In Q4 2014, Mobile Services deal value reached a new high of US$987 million since 2012 when we started to track investment trends.

Figure 60: Deal volume by Mobile subsegments 2012-2014

Mobile Entertainment: Ranking second, with the transformation from a singular model to a complex model.

The deal volume in Mobile Entertainment reached the top in Q3, seeing 31 transactions. The investment classifications covered games, videos, PS, music, reading and so on. Mobile Entertainment transformed from a singular model to a complex model. Although deal volume in Q4 decreased 26% compared to Q3, Mobile Entertainment was still the main sector of Mobile investment in 2014.

Mobile Healthcare: The new hotspot of the Telecommunications and Mobile industry, creating easy access to healthcare services.

Mobile Healthcare changed the traditional idea that people could only see a doctor in a hospital. It is a promisng industry, with great potential along the supply chain, which would bring profits for mobile operators, medical device makers, chip companies and application developers. Mobile Healthcare has become a hotspot of investment in the Mobile industry. In Q4 2014, a well-known Internet company received US$100 million to develop online registration and mobile booking services.

As the pace of people’s lives increases along with a continuous rise in the “fragmentation of time”, mobile devices will replace PCs and become the main interface to access the Internet. Furthermore, as large-screen phones and high-speed mobile Internet gain in popularity, mobile apps are starting to realize their value. The increase in the number of large-value investments in mobile entertainment, service and healthcare businesses is a manifestation that market leaders have started to emerge in these areas, and will build entry barriers to newcomers.

PwC Viewpoints

35

30

25

20

15

10

5

0

Q1’12

12

2

9 9

3 4 4 43 333321 11 11 1 11 1 1 1111

4 421

11

8 8

57 7 7

10 1011

68 8 8 88

6

2018

19

15 16

20 20

23

29 2931

Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

6 66 6 6

2 23

42 2

32

6

34

9 9 9

5

2 2 2 23

2

6 3

23 33

10

4

12

5

14

Mobile Entertainment Mobile Advertising

Mobile Shopping Mobile Healthcare Mobile TechnologyMobile Education

Mobile Services Mobile Social MediaMobile FinanceMobile Messaging


6. Methodology and definitions

TMT is an acronym for Telecommunications, Media and Technology. In this report, we have carried out analysis of the three most active sectors within TMT. They are Technology, Internet and Telecommunications and Mobile.

This report covers Q3 and Q4 2014. However, in order to show trends and make comparisons in the industry, we have included data from the first half of 2014 as well as all four quarters of 2012 and 2013. Deals that did not disclose the specific investment period, investment value or investment stage were excluded from the relevant analysis in order to maintain the accuracy of the report.

All data in this report was provided byZero2IPO Research.

DefinitionsTechnology sector

Electronics & Optoelectronics Devices: Optoelectronic components, optoelectronics, electronics, and power supply

Software: Software applications for business or consumer use

IT Services: IT consultation, software outsourcing, computer repair, computer and network security

Semiconductor: IC design, IC testing and packaging, IC equipment manufacturing

Hardware: Computer hardware, computer peripherals, network equipment

Internet sector

E-commerce: B2C, B2B, C2C, e-payment

Internet Services: Online travel services, online recruitment services, online housekeeping services, etc.

Internet Marketing: Search engine, digital ad agency work and Internet marketing services

Online Education: e-learning, Online classroom, etc.

Online Entertainment: Online gaming, online video, online music

Social Media: BBS/Forum, online networking

Internet Finance: Shadow banking, P2P, online fund-raising, online payment

Telecommunications sector

Telecom Equipment and Terminals: Communication equipment, terminals, software

Other Telecommunications Subsectors: Mobile operators, fixed-line operators

Mobile: Mobile entertainment, mobile advertising, mobile shopping, mobile healthcare, mobile technology, mobile education, mobile services, mobile social media, mobile finance, mobile messaging

Entertainment and Media sector

Traditional Media: Newspaper, magazines, publishing

Outdoor Media: Outdoor print ads, outdoor LED TV, mobile TV, building TV

Video Production and Distribution: Film and television production and distribution

Advertising: Ad agencies, media buying

Cultural Exchange: Cultural exchange agency, etc.

Entertainment & Leisure: Animation and other industries


Stage of development

Early stage: This stage varies from one to five years while the product or concept is under development and not yet in mass and commercial production. During this stage, funds are mainly used for acquiring production equipment and developing products as well as marketing and setting up management systems.

Expansion stage: The investment period at this stage usually lasts about two or three years. The product or service is in production and commercially available. The company generally needs more funds to further develop the product, as well as to expand facilities and production. Inventory planning and marketing efforts are also ramped up.

Late stage: During this stage, the company has grown its operating revenue, and is more likely to be, but not necessarily, profitable. The company may have plans to go public. The main purpose of financing is to seek capital to grow capacity, and to introduce shareholders with industry experience and influence, thereby increasing corporate recognition and attracting shareholders. The company will aim to improve its financial structure and management team in preparation for listing. At this stage, the investment is low risk, but has a lower chance of high returns.

PIPE (private investment in public equity): PE investments in publicly listed companies via preferential allotments or private placements, and the acquisition of shares by PE firms via the secondary market.

Exits

Initial public offering (IPO): This includes the sale of the PE or VC investors’ equity stake in an unlisted company through its first public offering of stock.

Strategic sale: This includes the sale of the PE or VC investors’ equity stakes(or the entire investee company itself )to a third-party company.

Management buy-out: The purchase of a company by its management through either debt-credit finance or stock transaction, which results in relevant changes in corporate ownership, control, residual claim and assets, in order to alter the structure of corporate proprietary rights.

Secondary sale: Any purchase of the PE or VC investors’ equity stakes by another PE or VC investors constitutes secondary sale.


If you’d like to discuss what’s happening in your particular technology market or how PwC might be able to help your company meets its challenges, please reach out to one of the technology industry leaders listed here.

7. Contacts

Marcel FenezGlobal Leader Entertainment and Media PwC China TMT Leader+852 2289 [email protected]

Jianbin GaoPwC China technology Industry Leader [email protected]

MoneyTreeTM China TMT Report Editorial Team

Frank LinSenior Manager, Technology [email protected]

Stacy ZhangMarketing Manager, Private Equity & Technology [email protected]

GlobalRaman Chitkara+1 408 817 [email protected]

AustraliaRod Dring+61 2 8266 [email protected]

BrazilEstela Vieira+55 1 3674 [email protected]

CanadaChristopher Dulny+1 416 869 [email protected]

ChinaJianbin Gao+86 21 2323 [email protected]

FrancePierre Marty+33 1 5657 [email protected]

GermanyWerner Ballhaus+49 211 981 [email protected]

IndiaSandeep Ladda+91 22 6689 [email protected]

JapanMasahiro Ozaki+81 3 5326 9090 [email protected]

KoreaHoonsoo Yoon+82 2 709 [email protected]

NetherlandsIlja Linnemeijer+31 (0) 88 792 49 [email protected]

RussiaYury Pukha+7 495 223 [email protected]

SingaporeGreg Unsworth+65 6236 [email protected]

TaiwanAndy Chang+886 (2) 2729 6666 ext [email protected]

UAEPhilip Shepherd+97 1 4304 [email protected]

UKJass Sarai+44 (0) 1895 52 [email protected]

USPierre-Alain Sur+1 646 471 [email protected]

www.pwccn.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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About PwC’s Technology Institute

The Technology Institute is PwC’s global research network that studies the business of technology and the technology of business with the purpose of creating thought leadership that offers both fact-based analysis and experience-based perspectives. Technology Institute insights and viewpoints originate from active collaboration between our professionals across the globe and their first-hand experiences working in and with the technology industry.

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