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UPDATED: April 23, 2007 NO.16 APR.19, 2007
The Explosive Growth of TMT
As the technology, media and telecommunications (TMT) convergence gains traction worldwide, venture capitalists look to China and its growing hi-tech consumer base as the next big market

The TMT sector was undoubtedly among those favored by venture capitalists. According to Zero2IPO, one of the leading integrated service providers in China's venture capital and private equity industry, though a downward trend occurred in the second half of last year, investment and the number of cases within the IT sector still dominated the market overall, with capital input accounting for 62.1 percent of total investments.

Mergers and acquisitions in the TMT sector were also active in 2006. Zero2IPO's China Merger and Acquisition Market Annual Report 2006 showed 101 mergers and acquisitions took place in China's TMT, health care and energy sectors last year. Some 79 belonged to TMT-related companies alone, 45 of which involve a total capital of $2.178 billion.

According to NVCA, media and entertainment, energy and Internet-specific sectors will continue to see growth in venture capital this year.

Match point--digital convergence

The latest report from Deloitte's TMT Industry Group forecast an overwhelming trend of TMT activity in the global market.

The report pointed out that from 2005 to 2010 at least $1 trillion could be generated from converged TMT products or services. Voice over Internet Protocol (VoIP), or phone service through the Internet, is considered the most important of these converged services. Revenue from VoIP alone could total $1 trillion by 2010.

The convergence can also be seen with other products like new-generation digital music players, home theater systems, home video phones and web-based enterprise cooperating platforms. Those are expected to generate a market of $90 billion by 2010 and a total of $360 billion over the next five years.

The report also predicted that by 2010, revenues of $60 billion could be generated from web-based enterprise coordinating services, $55 billion from IPTV, $50 billion from mobile phone content services, $35 billion from online gaming and $20 billion from online music.

Charles Yen, Leader of Deloitte China's TMT Group, said the development of TMT is promising in the Asia-Pacific Region. TMT companies have skyrocketed in the region during the past three years, with an average annual increase of 412 percent. The pace in China is especially outstanding and compares to these rates.

But Yen also said the enterprises in the Asia-Pacific Region should learn from the experienced companies in Europe and America. They should enhance their competence in research and development.

According to Yen, China has a great talent pool and a sound infrastructure to build a thriving TMT industry. But those are not the only keys to success. It will not be able to take advantage of its low labor costs for a long time.

"I suggest the country's TMT enterprises focus on their research and development, which is the key to their success," said Yen.

Yen continued to say that although "convergence" is a modern word for the TMT industry, real convergence has yet become reality. "TMT companies need to change their existing business model," said Yen.

As examples, he gives online newspapers and online music, both candidates of converged products or services. Even though newspapers invest much on building websites and developing free reader services on the Internet, they gain little from their online stories, according to Yen.

By contrast, online music services have successfully shifted their focus as far as including mobile phone users. Ring tone sales in the domestic market are expected to reach $5 billion by 2008, about 10 times higher than what domestic online music sales were in 2004.

Yen said the diversity of the mobile phone ring tone market ensures large profits from the online music business. In his opinion, if the Chinese media want to make a name for themselves online, they need to address their web business structure.

Wang Jin, from Analysys International, also believed innovative minds are urgently needed in the TMT arena. It is only through the creation of innovative products that companies can secure a leading place in the avant-garde of these technological markets.


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