SUNDAY Communications Limited: Interim Results 2004 Announces 38% Rise in First Half Profit to HK$18 Million (Hong Kong dollar is translated to United States dollar at a rate of HK$7.8 to US$1.0) * Net profit up 38% to HK$18 million * 4% rise in post-paid subscribers * 38% rise in data service revenues * Churn improved by 35% * Focus on 3G future HONG KONG, Sept. 13 /Xinhua-PRNewswire-FirstCall/ -- SUNDAY Communications Limited (SEHK:0866SEHK:Nasdaq:SEHK:SDAY) today announced its results for the six months ended 30th June 2004, recording a 38% increase in net profit to HK$18 million, against net profit of HK$13 million for the corresponding period of 2003. "Our results reflect the success of SUNDAY's core strategies to segment the market to provide specialised services to specific customer demographics, and to deliver efficiency, quality and innovation in all areas of operation," said Group Managing Director Bruce Hicks. "We reported a higher net profit as post-paid subscriber numbers rose, data services revenue grew strongly and churn improved. The Group remains confident that its strategy to introduce new multimedia services based upon the 3G platform with strong support and backing from Huawei Technologies, when consumer acceptance rises and the market can offer improved handsets, will fully optimise our future success." COMPETING IN A CHALLENGING MARKET The improved profitability came despite a market environment that remained highly competitive, with voice tariffs falling over the 12 months to June 2004 by an average of some 30% for post-paid services and 50% for pre-paid services throughout the industry. Accordingly, revenues for the six months declined to HK$575 million, as mobile services revenues fell by 10% to HK$521 million compared with the first six months of 2003, in line with an industry-wide decline in average revenue per user (ARPU). PROGRESS IN OPERATIONS While maintaining its competitiveness in the current price-driven market, SUNDAY laid a strong foundation for an advantageous starting position in the high value-added market that 3G technology will usher in early in 2005. In particular, the Group concentrated on enhancing its subscriber base, with subscribers who are more inclined to make full use of new technologies and services. SUNDAY increased its post-paid subscribers by 4% to 432,000 at 30th June 2004 as compared with 30th June 2003, while the pre-paid category fell by 4% to 227,000, as some competitors launched aggressive price promotions to attract lower usage pre-paid consumers. Overall the subscriber base showed a modest increase over the figure 12 months earlier. Despite the competitive environment, SUNDAY's continued focus on excellent customer service led to a further improvement in average churn, which has improved by 35% and is down to 3.6%. The success in attracting and retaining quality subscribers, and showing a growth in net profit levels, was a result of the success of the four pillars of the Group's business strategy: Efficiency. SUNDAY was able to achieve incremental cost savings in a number of areas. Excluding 3G related expenses, 2G operating expenses decreased by 21% or HK$66 million, whereas overall operating expenses decreased by 17% or HK$53 million. Earnings before interest, tax, amortisation and depreciation (EBITDA) for the 2G operations increased to HK$161 million, while total EBITDA decreased by 8% to HK$148 million when 3G expenses of HK$13 million for the half are included. Quality. SUNDAY's quality focus in 2003 was on the Group's infrastructure. In 2003, SUNDAY significantly improved coverage and quality through extensive network enhancements, including increasing the number of cell sites and reconfiguring cell sites throughout the territory. This year, the Group's focus was on further enhancing customer service levels. To improve the customer experience and in preparation for the rollout of full-fledged multimedia services, SUNDAY has launched a programme to renovate its retail shops across Hong Kong. As the first phase, 25% of SUNDAY's shops were renovated during the first half of this year. To further enhance customer service, the Group has initiated more extensive "mystery shopper", "mystery caller" and focus group exercises to gain an insight into current customer service levels. SUNDAY has also contracted AC Nielsen to monitor, on a monthly basis, more than 100 customer service and network quality attributes. Innovation. Innovation continued to be a hallmark of SUNDAY's services and marketing. To increase its lead in location based services (LBS), SUNDAY, in conjunction with China Mobile, developed a hybrid LBS system involving a Global Positioning System (GPS), which extends the benefits of LBS beyond Hong Kong's borders into southern China. This service is particularly helpful to companies managing fleets of vehicles travelling between Hong Kong and the Pearl River Delta region, and represents one of the most advanced LBS services in the global market. Recognising the growing demand for mobile email services, SUNDAY introduced an innovative mobile email service "One Bridge", which allows companies and individuals to synchronise their emails conveniently between network servers and SUNDAY's mobile PDAs. The Group strongly believes these types of innovative services not only support subscriber growth and drive data usage, but serve as an effective migration tactic to lead specific customer groups to embrace new offerings in the advanced multimedia future. Segmentation. The strategy of segmenting the market according to specific user profiles also contributed to the results. The Group's four customer segments -- Youth, Corporate, Ethnic and Mass -- expanded in May 2004 with a programme targeting the new "BOBO" segment, Hong Kong's aspiring class of "bourgeois bohemians". The striking launch campaign capitalised upon an emerging lifestyle trend among Hong Kong's affluent, educated middle class, and also significantly raised the Group's overall profile among consumers. The results in SUNDAY's Youth segment, which was launched in 2003, amply demonstrate the Group's success in using segmentation as a strategy to drive growth in subscriber numbers and data usage. Since launch in June 2003, in response to targeted product development and marketing, SUNDAY has grown the Youth segment and its value considerably. The Group also continued to strengthen its Corporate and Ethnic segments with enhanced product features and promotions. Through segmentation, SUNDAY is capturing not just new subscribers but high value subscribers who are more receptive to non-voice services, thereby forming the subscriber foundation for SUNDAY's future multimedia services. STRONG GROWTH IN DATA SERVICES REVENUE SUNDAY's efforts in the half allowed the Group to post another strong increase in data services revenues, which rose by 38% over the corresponding period of last year to account for 8% of total mobile service revenues. This growth is particularly encouraging as it points to the marked shift towards more data services that will occur beginning in 2005 as 3G technology garners mainstream adoption. Increased data usage was stimulated by the introduction of new and affordable handsets. In a market situation in which aggressive handset subsidies have again become the competitive norm, SUNDAY has followed a future-focused strategy whenever possible to develop handset subsidy promotions for products which are most likely to encourage an increase in data usage. FOCUSED ON THE 3G FUTURE "We are confident that our existing business will remain competitive even under current conditions and will continue to counter the competition as we prepare for an aggressive launch of multimedia services using the 3G platform," said Mr. Hicks. "We have consistently said we will only launch our 3G service once the technology and the market are ready, and events have so far proven this is the right strategy." SUNDAY's 3G strategy is firmly in place and its technological infrastructure will be ready to launch by end 2004. During the first half, the Group has built and successfully tested a pilot 3G system, with solid results. SUNDAY is using advanced 3G technology from Huawei, which is now supported by a team of over 140 Huawei personnel on the ground assisting with the rollout of the Group's 3G networks across Hong Kong. Huawei's acquisition of an 8% stake in SUNDAY through the open market is further proof of their confidence in SUNDAY's 3G strategy. The Group is also working smoothly together with other best-of-class vendors to deploy a number of key operating systems, including new billing and business intelligence systems and a complete website revamp. The Group continues to approach its launch of 3G services from the perspective of long-term success. Rather than launch in an environment plagued by handset quality and availability, network availability, call connection reliability and 2G-3G network interoperability, the Group has been wise to wait and currently aims to launch in early 2005 when these issues have improved. The Group is confident that this strategic approach has enabled it to avoid most of the teething problems common with the introduction of new and complex technology, and will provide long-term strategic advantage. The Group is confident that SUNDAY is ready and when the timing is right, SUNDAY will be successful in the 3G era. "In 3G, timing is everything. Timing of the launch is critical to the service and it's also critical to optimising the financial success of 3G," Mr. Hicks added. "SUNDAY has done an excellent job to truly understand the Hong Kong market. We haven't launched 3G yet and therefore haven't suffered the pitfalls of launching too early, before the market understanding and demand is where it needs to be. The momentum we're seeing today with existing 3G services is driven mainly by heavy subsidies and an approach really based upon 2G services. This will change, but I'm convinced it won't be until early or mid-2005. That's when SUNDAY 3G will launch, and we'll launch it in a manner that will generate excitement and attract take up from consumers across all demographics." About SUNDAY SUNDAY is an innovative developer and provider of wireless communications and data services in Hong Kong. SUNDAY began commercial operations in 1997. The company's core strategy is to capitalise on the convergence of wireless communications and data technologies to develop innovative, relevant and value-driven services and solutions. Today, SUNDAY enhances people's lives by delivering wireless voice and data applications and services to meet the lifestyle needs of specific customer segments. Owning a 3G mobile license, SUNDAY has the increased bandwidth and advanced technology to meet the rapidly developing market demand for enhanced multimedia services. This and other information about SUNDAY can be accessed via http://www.sunday.com/, http://www.irasia.com/listco/hk/sunday, and http://www.quamnet.com/ . For enquiries, please contact: Media Stella Wong Corporate Communications Manager Tel: (852) 2113-8251 / 9230-5501 Email: Investor Relations Email: DATASOURCE: SUNDAY Communications Limited CONTACT: Media - Stella Wong, Corporate Communications Manager of SUNDAY Communications Limited, +852-2113-8251 / 9230-5501, , or Investor Relations -

Copyright