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Vtion Wireless Technology AG Announces Network Development Project with China Unicom

Frankfurt, 27 July 2012

Vtion Wireless Technology AG, one of the leading suppliers of wireless data solutions for mobile computing in China, announces its participation in a joint project with China Unicom to develop fixed-line internet connections in new housing developments throughout Fujian Province.

Vtion will be responsible for constructing the so-called "final kilometer" of the network, which enters directly into each housing development and home unit. Vtion will co-invest in the project for an amount of Euro 1.7 million, and continually invest through 2016. Investment beginning in 2013 will be approximately Euro 3 million annually. Vtion will earn a commission on each of the connections it sells, with commissions running through 2022.

 

Cooperation Model

China Unicom has established a fixed-line network throughout Fujian Province, but typically outsources the final kilometer of the network to third parties. Vtion will be responsible for constructing the final kilometer of the network, establishing the individual connections within residential or commercial properties and then selling those connections to the users there. Vtion will outsource the actual construction work through the use of temporary workers, and devote sales personnel to selling the individual connections. Vtion will be responsible for establishing connections, sales and promotion of the connections as well as after-sales maintenance and support. For the first five years, Vtion will receive a 60% commission from China Unicom for each connection, paid upon activation, and a 30% commission for connections activated after the fifth year. During the first five years of the project between 10% and 15% of Vtion's commission will be paid to the property developer of the property in which Vtion set up the connections. Vtion will retain the entire commission paid by China Unicom after the fifth year.

 

Greater market reach

Vtion will remain primarily focused on wireless connectivity and mobile computing solutions. The engagement in a fixed line project is intended to strengthen cooperation with China Unicom and open new market opportunities in household computing. With greater market reach, Vtion expects to expand its opportunities to sell mobile applications and solutions, both imbedded in hardware and independently.

 

Strong Ties to China Unicom

"We are very pleased to announce this cooperation with China Unicom," states Vtion CEO Chen Guoping. We have a long-standing relationship of strategic cooperation and look at this as the next step in strengthening that relationship. Though our primary focus of our cooperation in the past has been with wireless connections, we see that there is strong opportunity in the fixed-line market as well. China Unicom considers us a well-capitalized and reliable partner to help them develop the final kilometer of their network, and we are honored they have chosen us. Our balance sheet allows us to make the necessary investments and our strong sales capacity is well known to China Unicom; we are confident this will be a successful endeavor for both of us."

Currently there are 1.6 million broadband connections in Fuzhou city, with an expected annual growth rate of 20%. There are 6 million connections in Fujian Province as a whole, with an expected growth rate annually of 15%. Vtion sees strong market potential given both expected growth rates and China Unicom's strategic development plans. Currently China Unicom has a 10% broadband market share in Fujian Province, which it expects to increase to 30% within three years.

 

Long-Term View

Vtion's management believes telecom operators are moving to a model in which they no longer measure users in terms of the individual, but rather in terms of households. If an operator is able to capture an entire household, it will have the ability to sell a complete package of both fixed-line and mobile service, along with hardware and software.

"We see the "final kilometer" as the entry point into the household unit," states Vtion CEO Chen Guoping. "Certainly you could say we are moving away from our core competency by participating in a fixed-line project as opposed to a wireless project, but we have taken a longer term view. Through this project, we not only earn commissions on the connections we sell and strengthen our cooperation with China Unicom, but we gain access into the household. From this we can add other offerings, such as mobile connectivity solutions and online applications. We see this as a first step in expanding our sales reach."

 

About Vtion

The Vtion Group is a leading supplier of wireless computing solutions and products for mobile internet access via broadband wireless networks in the People's Republic of China. The company offers tablet PC products and support services through its mobile intelligent terminals business segment, including both to the consumer market and industry-specific clients. Through its wholly-owned subsidiary, Vtion Anzhuo, the company offers online applications for the Android operating system. For 2011, the company reached sales revenues of EUR 77 million with an EBIT margin of 10.3%. Vtion Wireless Technology AG shares are being traded in the Prime Standard on the Frankfurt Stock Exchange with the ISIN DE000CHEN993. The company's ticker symbol is V33.

 

For further information, please contact:

Kirchhoff Consult AG
Dr Kay Baden, tel.: +49 40 60 91 86 0, baden@kirchhoff.de

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