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Press Release -- August 23rd, 2013
Source: Comba Telecom

Comba Telecom Announces 2013 Internal Results

(23 August 2013 – Hong Kong) – Comba Telecom Systems Holdings Limited (“Comba Telecom” or “the Group”, Hong Kong stock code: 2342), a global leading wireless solutions provider, today announced its unaudited interim results for the six months ended 30 June 2013 (“the period under review”).

In the first half of 2013, due to the tight monetary supply in the PRC and the postponement of certain investment activities as PRC mobile operators were more prudent in the timing of investments, the Group’s revenue was negatively affected. During the period under review, the Group’s revenue was HK$2.16 billion, representing a decrease of 16.6% compared to the same period last year. Meanwhile, as a result of the change of product mix and the intense market competition, the Group’s gross profit margin dropped slightly to 25.5%. Owing to decreases in both revenue and gross profit margin, the Group recorded an operating loss of HK$111 million in the period under review. The Board does not recommend any interim dividend.

Mr. Tony TL Fok, Chairman of Comba Telecom, said, “Despite the challenges, the Group is still undergoing a product transformation to capture more business opportunities presented by favorable market trends. Meanwhile, the Group continues to actively penetrate international markets and has achieved several satisfactory results. To date, the Group has completed the initial phase of wireless projects for the 2014 World Cup in Brazil and the 2014 Winter Games in Russia. By capitalizing on its abundant experience of providing wireless solutions for prestigious projects, the Group is striving to expand its project portfolio across different regions. In addition, the Group continues to implement stringent cost control initiatives to maximize its operational efficiency and further minimized its selling and distribution expenses as well as administrative expenses. By strengthening organizational structure, streamlining production processes and adopting stringent cost control measures, the Group is confident that its financial position will have a gradual improvement in the coming years.”

During the period under review, sales from third generation mobile communications (“3G”) mobile network projects recorded stable revenue of HK$991 million, accounting for 45.8% of the Group’s total revenue. Revenue from China Telecom increased by 8.1% to HK$215 million, while revenue from China Mobile and China Unicom declined by 12.6% and 46.6% to HK$1.18 billion and HK$306 million respectively. Revenue from international customers and core equipment manufacturers stabilized at HK$432 million, accounting for 20.0% of the Group’s revenue

Due to change in market demand and the fact that Small Cell products have yet to reach large-scale ramp-up, sales from WLAN products were lower than expected. As a result, revenue generated from the wireless access and transmission business during the period decreased by 48.9% to HK$182 million and accounted for 8.4% of the Group’s revenue. However, the management expects the Small Cell revenue contribution should rise in the second half of the year in view of new network rollouts and upgrades. Due to the decrease in the market demand for base station antennas as a result of the postponement of certain investment activities by mobile operators, as well as the fierce market competition within the traditional enhancement products, revenue generated from the antennas and subsystems business and from the wireless enhancement business decreased by 18.2% and 20.4% to HK$712 million and HK$557 million, respectively. Thanks to the increasing contribution from system integration and maintenance projects, revenue from services increased by 6.8% to HK$712 million, accounting for 32.9% of the Group’s revenue. Owing to the seasonal nature of the industry, the management expects the performance of the services segment will improve in the second half as most of the inspections will be completed.

The Group has pursued product innovation in order to maintain its competitive advantages. It has launched a number of new generation of innovative products and solutions in response to development trends in the industry and customers’ needs: small cell products can effectively offload hotspot traffic while providing better coverage of blind spots and weak coverage areas; the Multi-Service Fiber Optic Distributed Access System (MDAS) solutions are able to support 4G, 3G, 2G and WLAN simultaneously which help facilitate rapid network rollouts for mobile operators; the new generation of LTE antennas enables the Group to provide customers with a smooth migration solution from 2G/3G to LTE with an unrivalled cost/performance ratio; and the Packet Transmission Network (PTN) enables both voice and data transmission over IP backhaul with high capacity and throughput which is an optimal solution for data-intensive 3G and 4G networks.

While strengthening its position in wireless access, wireless enhancement, wireless transmission, antennas and subsystems and services, the Group will create more cross-product synergies aimed at offering more value-added services to its customers. The Group’s satellite emergency communications have played a key role during several natural disasters and large-scale events, in line with the stronger emphasis placed by the PRC government on the development of emergency communications. Meanwhile, in light of the PRC government’s plans for extensive rail communication development in recent years, the Group is unveiling several solutions focusing on wireless projects for rail transportation. This new business unit will be one of the new growth drivers for the Group in the future.

Mr. Fok added, “The global telecommunications industry is now experiencing steady growth. Modern industrialization, informationization and urbanization in China are stimulating domestic demand, creating a favorable market environment. The market expects The Ministry of Industry and Information Technology to release 4G telecommunications licenses in the coming future, and mobile operators are anticipated to increase their investments in 4G networks for service rollouts and network migration. These investments will present immense opportunities to the Group in the future. Globally, against the backdrop of economic recovery, with its efforts at strengthening branding and reputation, improving product quality together with its and increasing greater market experience, the management expects that the Group’s international markets should continue to grow next year. The management, therefore, remains cautiously optimistic about the future prospects of the industry and the Group.”

Mr. Fok concluded, “At present, Comba Telecom’s development has reached a key turning point and our products are undergoing transformation to capture the opportunities available in the era of data. Although the Group has encountered challenges in the transformation process, the management is fully confident it is moving in the right direction of product transformation. Looking ahead, product transformation is expected to add a new impetus to the Group’s long-term development. We will also strive to optimize the product mix by launching new products and solutions as well as to expand the scope of services to customers in order to improve the gross profit margin. By leveraging the Group’s quality products and solutions, rich market experience and industry-leading innovative technologies, we believe the efforts and resources the Group has devoted will soon reap rewards.”

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