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Disclaimer
This presentation does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of 21Vianet Group, Inc. (the “Company”) in any jurisdiction or an inducement to enter into investment activity, nor may it or any part of it form the basis of or be relied upon in connection with any contract or commitment whatsoever. Specifically, this presentation does not constitute a “prospectus” within the meaning of the U.S. Securities Act of 1933, as amended.
This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of the Company. No part of this document shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. No securities of the Company may be sold in the United States without registration with the United States Securities and Exchange Commission or an exemption from such registration. Any decision to purchase securities in the proposed offering should be made solely on the basis of the information contained in the statutory prospectus in relation to the proposed offering.
This presentation has been prepared by the Company solely for use at this presentation. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors, representatives or underwriters will be liable (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation.
This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company or any of its affiliates, advisors, representatives or underwriters has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances.
In evaluating our business, we use certain non-GAAP measures as supplemental measures to review and assess our operating performance. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performances, investors should not consider them in isolation, or as a substitute for net income (loss) or other consolidated statements of operation data prepared in accordance with U.S. GAAP.
THE INFORMATION CONTAINED IN THIS DOCUMENT IS HIGHLY CONFIDENTIAL AND MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED.
By attending this presentation, participants agree not to remove this document, or any materials provided in connection herewith, from the conference room where such documents are provided. Participants agree further not to photograph, copy or otherwise reproduce these materials in any form or pass on these materials to any other person for any purpose. Participants must return this presentation and all others materials provided in connection herewith to the Company at the completion of the presentation.
3
Snapshot of 21Vianet
Leading Internet infrastructure services provider in China
– #1 carrier-neutral Internet data center services provider in
China1
80+ data centers and over 13,300 cabinets under management
in more than 40 cities in China
Our network is interconnected with networks operated by all
of China’s telecom carriers, major non-carriers and local ISPs
Over 2,000 customers with low monthly churn rate of approx.
1.64%2, Top 20 customers’ churn rate remained at 0%
Partnering with Microsoft to offer cloud services in China
Providing Cloud CDN through the acquisition of Fastweb
Products including: Managed Hosting, MNS, Cloud Computing
& CDN
1. According to IDC
2. As measured by monthly recurring revenue (MRR)
Products of 21Vianet
5
Hosting and Related
Services
- managed hosting services,
interconnectivity services and
value-added services
Managed Network Services
– hosting area network
services, route optimization
and extensive data
transmission network
Cloud Computing –
Microsoft Windows Azure and
Office 365
Content Delivery Network -
proprietary CloudCDN
platform software and cloud
enabling technology solutions
21Vianet
Public Cloud Services With Microsoft
Microsoft’s
Windows Azure
■ Public preview of Windows Azure service available in China on June
6, 2013
■ 21Vianet helps Microsoft to be the first multinational in the world to
bring public cloud services to China
■ Windows Azure provides public cloud computing platform services
including computing, storage, database, integration and networking
services
■ Kingdee, Qoros, RenRen, PPTV, HiSoft and Shanghai Municipal
Government are current users
Microsoft’s
Office 365
■ Public preview of Office 365 available in China on August 8, 2013
■ Office 365 offers cloud versions of Office Professional Plus,
Exchange Online, SharePoint Online, and Lync Online.
■ Potential customer base will include: Small & Medium Enterprises
(SMEs), Multi-National Corporations (MNCs) and government
agencies
June 2013
August 2013
Date Products Products Information
2010-2016 Public Cloud Services Market Size in China
1.6
2.7
3.7
5.1
6.5
8.5
10.5
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016
US$Bn
Source : Gartner
8
Challenges of China’s Internet Infrastructure
2 Major Carrier Networks with Different Geographic Coverage
— Each with over 31 independently operated provincial entities
3 overloaded NAPs in China:
— Beijing, Shanghai and Guangzhou
China’s Internet Infrastructure Key Characteristics
VNET VNET VNET VNET VNET
Nationwide network coverage is rare due to
carriers’ decentralized network management
– Two major carrier networks with respective
geographical coverage (China Telecom in the
South, China Unicom in the North)
– Carriers’ provincial subsidiaries operate
independently in 31 provinces
Inadequacy of network interconnectivity
– Interconnection between the North and South
predominantly through three overloaded network
access points (NAPs)
– Limited inter-provincial network connections within
the same network
Operating data center requires regulatory
approval
– Foreign entities are prohibited from owning more
than 50% of a value added telecommunication
provider
– Very difficult to obtain national licenses
Requires large capital to achieve scale
– Significant time and investment required to develop
nationwide interconnection
– 21Vianet spent more than 10+ years to reach more
than 80 data centers.
9
Interconnection in China is Slow
China’s Connection Speed
Rank Province Avg. Mbps
1 Shanghai 4.3
2 Fujian 3.4
3 Zhejiang 3.2
4 Shandong 3.2
5 Jiangsu 3.1
6 Jiangxi 3.1
7 Anhui 3.0
8 Beijing 3.0
9 Sichuan 2.9
>10 Guangzhou 2.9
China Average 2.9
Source: CCINDEX
Rank Country / Region Avg. Mbps
1 South Korea 14.0
2 Japan 10.8
3 Hong Kong 9.3
4 Latvia 8.9
5 Switzerland 8.7
6 Netherlands 8.6
7 Czech Republic 8.1
8 United States 7.4
9 Sweden 7.3
10 Finland 7.1
Global Connection Speed
Source: Akamai
Connectivity challenges in China
– China’s national average connection speed of 2.9 Mbps is well below global top 10 countries
10
Our Inter-Cloud Express Network And Service Platform
21 Vianet’s Data Center 21 Vianet Inter-Cloud Express Network
As a well diversified carrier-neutral player, we believe we are well positioned in the data center
services market today and the cloud infrastructure services market in the future
Our Advantages
Largest carrier
neutral provider in
China
Turn-key solutions for
bandwidth,
computing, storage
and content delivery
Leverage our existing
and expanding
infrastructure purpose
built for cloud
services
Largest Carrier-neutral IDC Provider in China
Source: IDC, Oct 2013.
Note: Market share data as of year end 2012.
China IDC Market Share China Carrier-Neutral IDC Market Share
China Telecom
39%
China Unicom 20% China Mobile
3%
21ViaNet 12%
Other Carrier-Neutral
26%
21ViaNet 31%
Others 69%
Fast-growing Data Traffic Driving High Demand for IDC Providers
59.2% 54.5%
40.8%
45.5% $1.25
$1.70
0.0
0.5
1.0
1.5
2.0
2011 2012
Telecom Carriers Carrier- Neutral
$1.70
$2.11
$2.68
$3.43
$4.52
$5.93
0.0
2.0
4.0
6.0
8.0
2012A 2013E 2014E 2015E 2016E 2017E
Source: IDC China Internet Datacenter Forecast and Analysis.
(US$ Bn)
Growing Market Share of the Carrier Neutral IDC
Services Provider
(US$ Bn)
Strong Growth of the IDC Market in China
Source: IDC China Internet Datacenter Forecast and Analysis.
13
Growing Demand for Internet Traffic in China
Petabytes (1,000 Terabytes)
35.8%
26.4% 24.0%
20.3%
16.4%
0%
10%
20%
30%
40%
50%
China Japan Germany UK USA
High Growth in China Internet Traffic Growth Leader Compared to Developed Countries
3,237
4,691
6,709
8,825
11,012
0
2,000
4,000
6,000
8,000
10,000
12,000
2012A 2013E 2014E 2015E 2016E
Source: Cisco VNI Forecast
2012 – 2016 CAGR of Internet Traffic
14
Immense Potential for High Demand of Data Center Capacity in China
Source: Global Insight, Gartner
2012 Population (MM)
While China’s population is 4x larger than USA…
1,353
315 128 82 63
0
500
1,000
1,500
China USA Japan Germany UK
Source: Global Insight
Servers and Storage Units (000s)
…total data center capacity is only 40% that of USA
4,150
1,591
654 505 449
0
1,500
3,000
4,500
USA China Japan Germany UK
Source: Gartner
Potential High Demand of Data Center Capacity in China to Support Population
2012 Server and Storage Units / Person
0.0132
0.0071 0.0062
0.0051
0.0012
0.000
0.005
0.010
0.015
USA UK Germany Japan China
Data center capacity in China needs to grow 10x in order to catch up with America and to grow at least 25x in
order to catch up with USA, UK, Germany and Japan combine together.
15
Increasing Internet Penetration & Usage Globally
Social Networking Sites Online Gaming E-Commerce Online Video
SNS Market (RMB Bn)
1.2
5.7
9.6
0
2
4
6
8
10
12
2008 2012E 2014E
21
4654
0
20
40
60
80
2008 2012E 2014E
Online Gaming Market (RMB Bn) Online Video Market (RMB Bn) E- Commerce Market (RMB Tn)
29
101
206
0
50
100
150
200
250
2008 2012E 2014E
1.3
9.1
16.0
0
5
10
15
20
2008 2012E 2014E
Source: IResearch.
(MM) (MM) (%)
11%
37%
42%
46%
48%
58%
80%
78%
83%
83%
84%
0% 20% 40% 60% 80% 100%
India
Mexico
China
Brazil
Russia
Italy
France
US
Canada
Germany
UK
28.5
35.8
42.0
52.2
52.7
68.0
67.5
88.5
137.0
245.2
564
0.0 300.0 600.0
Canada
Italy
Mexico
France
UK
Russia
Germany
Brazil
India
US
China
211
300
386 460
513
609
675 729
769 807
0
100
200
300
400
500
600
700
800
900
2007 2010 2013E 2016E
Source: CNNIC at Jun 30, 2013 Source: www.internetworldstats.com as at
Jun 30, 2012
Source: Frost & Sullivan.
Internet Penetration Internet Users China Internet Users
16
Internet
Entertainment Portals
Government
and Financial
Institutions
Technology
E-Commerce
Manufacturing
baofeng.com
taobao.com
Guohua Life Insurance
Ministry of Foreign Affairs
of the PRC
Diversified and Loyal Customer Base
17
Web Services Internet Media
Online Gaming Web 2.0
Government & Corporate Operator / Service Provider Network Audio Visual
Ecommerce Mobile Internet
2013 Q2 Revenue Breakdown 2013 Q3 Revenue Breakdown
Revenue Break Down by Verticals
Internet Related Customers: 74%
5.9%
19.2%
16.6%
4.0%
8.4%
10.1%
9.3%
18.2%
7.4%
TOP 5 CUSTOMERS % to Total Rev
4.9%
3.3%
2.4%
1.8%
1.7%
Total 14.1%
Financial Industry
TOP 5 CUSTOMERS % to Total Rev
6.2%
3.6%
2.5%
2.1%
1.8%
Total 16.2%
5.9%
20.6%
16.4%
4.2%
8.4%
8.8%
9.6%
18.8%
6.8%
0.6%
Internet Related Customers: 74%
0.9%
18
Josh Chen
Founder,
Chairman
& CEO
■ Built the first carrier-neutral IDC in China
■ Founded Beijing Taixing Data Engineering and A-1 Netcom China, one of the
pioneering and most influential private ISPs in China
■ B.S. in Electrical Engineering from Tsinghua University
Internet
search
engines
13 21
Years with
21Vianet
Years of
Experience
Experienced and Stable Management Team
Shang Hsiao
CFO
■ Served as CFO of Memsic Inc. (NASDAQ: MEMS)
■ Served as SVP & CFO of Great Dream
■ Served as senior manager of Arthur Andersen in Philadelphia and Shanghai
■ Independent director of Camelot (NYSE:CIS)
■ J.D. (Rutgers) and AICPA
Internet
search
engines
3 26
Edward Liu
CSO
■ Co-founder and Chief Operating Officer since June 1999
■ Founded Beijing Taixing Data Engineering and A-1 Netcom China, one of the
pioneering and most influential private ISPs in China
■ Graduated from Tsinghua University
Internet
search
engines 13 21
Jun Zhang
Founder, COO
Internet
search
engines < 1 26
■ Served as Director of Business Development at Akamai Technologies, Inc.
(NASDAQ: AKAM)
■ Served as VP of Research and Strategy at Speedera Networks
■ Technical Co-founder of Resonate
Frank Meng
President Internet
search
engines < 1 30
■ Served as SVP and President of Qualcomm, Inc ("Qualcomm") in the
greater China region
■ Served on the board of directors for Unicom-BREW Telecommunication
Technologies, the joint venture between China Unicom and Qualcomm
■ SVP and President of Greater China for Motorola Mobility, LLC
Experienced and Stable Management Team (Cont’d)
19
Philip Lin
EVP of Strategy &
Development
■ Served as Chairman of Prime Networks, a CDN services provider
■ Served as a senior executive at Kluge & Company, the private equity arm for
John Kluge and Metromedia
■ Graduated from Cornell University and Columbia University (MBA)
Internet
search
engines 2 18
Feng Xiao
SVP of Hosting
Services
■ Joined 21Vianet since its inception
■ Served as planning manager of HeDe Group Company Internet
search
engines
13 17
Ningning Lai
SVP of Network
Services
■ Joined 21Vianet in March 2000
■ Worked with Capital Information development Co. Ltd. Network Engineering Internet
search
engines 12 12
Years with
21Vianet
Years of
Experience
Wing-Dar Ker
President of
Microsoft Cloud
Operation
■ Served as General Manager of Customer Service and Support (CSS) for the
Asia Pacific and Greater China (APGC) Region at Microsoft
■ Served as Finance Controller for APGC at Microsoft
■ Served as Manager and Group Head of the Business Systems Consulting (BSC)
group of Andersen Consulting
Internet
search
engines <1 19
21
Q3 2013 Financial Performance
• Revenue growth of 29.8% to RMB 514.0M (US$ 84.0M) from RMB 396.1M in
the prior year period. Quarterly revenue growth of 9.1% to RMB 514.0M
(US$ 84.0M) in Q3, 2013 from RMB 471.1M in Q2, 2013.
High Growth
• Adjusted EBITDA margin was 18.6% in Q3, 2013, compare to 18.5% in Q2,
2013.
• Adjusted net margin was 5.7% in Q3, 2013, compare to 4.0% in Q2, 2013.
Stable Profitability
• Churn rate was 1.64% in Q3, 2013 compared to 1.47% in Q2, 2013.
Top 20 customers’ churn rate remained at 0%
• Low customer concentration – largest customer accounted for 6.2% of total
net revenue
• Utilization rate was 73.7% in Q3, 2013, compare to 70.2% in Q2, 2013.
High Visibility
Notes: 1) Adjusted EBITDA is defined as EBITDA excluding share-based compensation expenses and changes in the fair value of contingent purchase consideration payable 2) Adjusted net income is defined as net income(loss) from continuing operations excluding share-based compensation expenses, amortization expenses of intangible assets
derived from acquisitions, changes in the fair value of contingent purchase consideration payable and related deferred tax assets and unrecognized tax benefits, tax incentive receipt and outside basis difference
396 418 436 471 514
0
100
200
300
400
2012Q3 2012Q4 2013Q1 2013Q2 2013Q3
22
119 123 126 136 149
30.0% 29.5% 28.8% 28.8%28.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
20
40
60
80
100
120
140
160
2012Q3 2012Q4 2013Q1 2013Q2 2013Q3
___________________________ Source: Company management accounts. Notes: 1) Adjusted Gross Profit = GAAP Gross Profit + SBC Expenses + Acquisition Related Amortization 2) Adjusted EBITDA = EBITDA + SBC Expenses + Change in Fair Value of Contingent Consideration Payables 3) Adjusted Net Income = Net Income + SBC Expense + Acquisition Related Amortization + Change in Fair Value of Contingent Consideration Payables and Related Deferred Tax assets
RMB MM
Net Revenues Adjusted Gross Profit(1)
Adjusted EBITDA(2) Adjusted Net Income(3)
RMB MM
RMB MM RMB MM
Financial Performance (Cont’d)
Adjusted Gross Profit Margin Adjusted Gross Profit
52
39
39
19
30
13.2%
9.5%
7.1%
4.0%
5.7%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
24.0%
0
10
20
30
40
50
2012Q3 2012Q4 2013Q1 2013Q2 2013Q3
Adjusted Net Income Adjusted Net MarginAdjusted EBITDA Adjusted EBITDA Margin
76 78 80 87 95
19.2% 18.7% 18.4% 18.5%18.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
20
40
60
80
100
2012Q3 2012Q4 2013Q1 2013Q2 2013Q3
Growing Recurring Revenues
Notes: 1) Defined as average MRR divided by average number of cabinets over the period.
Hosting MRR per Cabinet (1)
8,455 9,019
10,467 10,422 10,559
10,520
-
2,000
4,000
6,000
8,000
10,000
12,000
2010 2011 2012 2013Q1 2013Q2 2013Q3
MRR per Cabinet