digitone.gifBeijing Digital Telecom Investment,
which confusingly employs two short names D.Phone and Digitone, claims
to be one of China's largest mobile phone retailers with a nationwide
chain of more than 600 stores.

So far, so conventional. However, D.Phone enjoys the support of 3i,
Europe's largest private equity firm, which last year invested $22m for
a minority stake in the company. What got our attention was that as
part of 3i's support package, D.Phone is able call on the skills of
David Ross, the co-founder of Carphone Warehouse, which is now Europe's
largest mobile phone retailer.

Ross is working as a consultant for 3i to help D.Phone with
“strategic and operational improvements” and if he can translate just
some of the success he has had on the high streets of Europe to D.Phone
then I suspect we will be hearing from D.Phone a lot more in the future
particular if 3i seeks to realise its investment through an IPO.

D.Phone executives attended last week's 3GSM show to remind the west
what a telecoms boom looks like. Mobile phone usage in China is soaring
and with penetration at around 35% there is still a lot to go for —
unlike in the west where mobile markets are now mature. In Spain, for
example, penetration is over 100%, meaning there are more phones than
people.

D.Phone predicts that China's mobile market will grow 25% in 2007
and Donghai Liu, chairman and CEO, sounded particularly bullish:

The imminent launch of 3G services and the issuance of additional
mobile licences will also add further impetus for growth in the handset
market. We expect mobile sales to further increase this year as we
expand our store network through strategic acquisitions and the
purchase of selected franchise stores to help serve strong market
demand.”

D.Phone is just one of the ten direct investments that 3i has made
in China to date. Others include Focus Media, an outdoor digital media
advertising business; CSMC a small semiconductor foundry outfit; and
Little Sheep, a restaurant chain that specialises in traditional
Mongolian hot pot. Yum, yum.

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