CTI Reports 2003 Annual Results Record Highest Ever Earnings in Two Consecutive Years Despite Intense Market Competition HONG KONG, Nov. 24 /PRNewswire-FirstCall/ -- * Group turnover grew 13% to HK$1,299 million despite intense market competition * Profit attributable to shareholders increased 183% to HK$258 million from HK$91 million of the last corresponding period * The Group's gross margin continually increased to 75% from 60% of the last corresponding period; while its gross profit rose 41% to HK$976 million from HK$692 million of the last corresponding period * The Group recommends a final dividend of HK cents 7.5, amounting to a total of HK cents 12.5 in this financial year * IDD business: -- Operating profit was HK$338 million, a rise of 52% from $223 million in the year before * FTNS (Fixed Telecom Network Services) business: -- The revenue of FTNS business grew 75% to HK$423 million -- The number of subscribers recorded significant growth: * The subscriber base surged over fivefold to reach 138,000 from just 21,000 last year in the residential sector; while the business also was making forays into the commercial sector, having successfully installed 8,000 commercial fixed lines * While we are making big progress in the residential market, we also maintain a fair presence in broadband service, with 164,000 residential and 8,000 corporate customers in number, enjoying 26% and 33% growth respectively * The business achieves a positive EBITDA of $78 million * The business accounted for 33% of total group turnover and became a major business and revenue generator of the Group City Telecom (HK) Limited (Nasdaq: CTEL; HKEX stock code 1137) ("The Group") today announced the annual results for the financial year ended 31st August, 2003. During the period under review, the Group's core business achieved impressive growth due to aggressive marketing strategies and cost efficiency. Despite the intensely competitive market, the Group achieved record level profit for the second year in a row. The Group turnover was HK$1,299 million, representing an increase of 13% from HK$1,150 million of year 2002. Following the record HK$91 million profit made in year 2002, our profit attributable to shareholders leaped 183% to HK$258 million, bringing the Group's profitability level to impressive new heights. Cash on hand and bank deposits totaled HK$447 million as of 31st August 2003. Earnings per share was HK cents 46.7 (HK cents 18.4 in 2002). The board of directors has recommended a final dividend of HK cents 7.5, amounting to a total of HK cents 12.5 in the financial year under review. Ricky Wong, chairman of City Telecom (H.K.) Limited said, "In retrospect, last year's telecommunications market remained highly competitive. Thanks to the significant operating efficiency and cost controls, the Group enjoyed impressive performance. While IDD business was growing steadily, the FTNS business witnessed faster pace of development and entered the harvest stage, which became another reliable revenue stream of the Group. Looking into the future, we shall put more focus to further expand FTNS business, hoping to diversify our quality service offerings to bring more revenue, and to enhance the Group's core business development in a more balanced act." Fixed Telecom Network Services Last year saw the FTNS business firmly established itself as a major business not only for the group but also from the market's point of view. The business accounted for 33% of total group turnover from 21% of the last corresponding period and became a major business and revenue generator of the Group. During the period under review, fixed telecom network service has shown major turnover increase of 75% to reach HK$423 million from HK$241 million last year. For EBITDA level, the business recorded a profit of HK$78 million this year. As a result of the outstanding performance, the operating loss of FTNS business was sharply narrowed to HK$63 million this year from HK$122 million of the last corresponding period. Spurred by our aggressive marketing strategy, new fixed network customers have recorded significant growth in the residential sector and quickly reached 138,000 by August from 21,000 of the last corresponding period, representing an increase over 5 times, while it reached 165,000 currently. Our broadband service had residential customers amounted to 164,000 in number, enjoying a 26% growth from 130,000 last year. While we are making big progress in the residential market, we also maintain a fair presence in the corporate sector, with a 33% increase of broadband customers from 6,000 last year to 8,000 this year. The Group also started to enter the corporate fixed line market with 8,000 lines. The Group has largely completed the network infrastructure and achieved the goal set last year of extending it to 1.2 million homepass and 550 commercial buildings. In order to propel our development in telecommunications services to provide comprehensive and all-rounded services, one of major initiatives for our FTNS services has been to build our own fibre backbone with the aim of boosting service quality and capacity, a condition necessary to fix our cost structure. More importantly, with our own high quality fibre network, the Group will gain high technological superiority and capacity to provide broadband, voice and pay TV concurrently to cater for growing market demands. This strategy will help create new sources of revenue, in addition to share costs, for the Group. International Telecom Services Our IDD business achieved stable growth this year in IDD business. Faced with a highly competitive environment where there were continually new market entrants, as well as existing players, who adopted an aggressive pricing strategy, we maintained our average tariff for the year at a level comparable to that of last year, keeping in line with the interest of maximizing profit for our shareholders. The turnover of IDD business dipped 4% to HK$876 million from HK$909 million last year. On the strength of successful pricing strategy and overall cost control measures, gross profit margin rose sharply. Also, operating profit were recorded at HK$338 million this year including a HK$84 million USC rebate, representing a robust growth of 52% as compared with HK$223 million last year. Excluding the rebate, the operating profit increased 14% to HK$254 million. However, we will closely monitor the situation in the coming year and if necessary will adjust our pricing policy to protect and enhance our market share. Prospects Our business looks as bright as ever. Our confidence is derived from our secured position in the IDD market plus our strong growth in the FTNS market, giving us two, not one, reliable revenue streams. In addition, we have adopted cost control measures to ensure efficient use of resources. The past year also has seen us breaking yet another record of profits and impressive profit margin, which is testament to the efficiency of running the business. The expected completion of our fibre network in December 2004 will also give us a strong platform to launch a host of new services to generate additional revenue. Looking ahead, we shall have two major tasks: firstly, putting focus on developing pay TV and secondly, looking into 3G mobile services based upon our existing IP network platform and wide customer base. It is our mission to make entry into the mobile market to become an integrated telecommunications services provider once the licenses currently hold by other operators are expired. Mr. Wong is fully confident with the future prospect of the group. "No matter it is IDD, broadband Internet or fixed line service, our services have long been successful and enjoyed market recognition. Our Group has taken on new businesses, moving on from fixed line to mobile; from telecommunications to TV. It is our hope to become an integrated telecommunications services provider, and marching towards the position of "Dominant Player", he concluded. Note to Editors: Established in 1992, City Telecom (H.K.) Limited provides comprehensive, integrated telecommunication services in Hong Kong and various overseas markets. In addition to IDD, the Group's core business, the Group has obtained both the wireless and wireline-based fixed telecom network service license, for the provision of broadband Internet access, local telephony and pay-TV services. The Group was listed on the Stock Exchange of Hong Kong (Stock Code: 1137) in August 1997 with an ADR Listing on the NASDAQ National Market (Ticker Symbol: CTEL) in the USA in November 1999. The Group's key companies are City Telecom (H.K.) Limited and Hong Kong Broadband Network Limited. Apart from the headquarter in Hong Kong, the Group established branch offices in Guangzhou and Canada as well. For details, please visit http://www.ctihk.com/. DATASOURCE: City Telecom (HK) Limited CONTACT: Corporate Communications - Jessie Cheng, +852-3145-4118, fax - +852-2199-8372, , or Investor Relations - Corinna Sio, +852-3145-6068, fax - +852-3145-6706, , both of City Telecom (HK) Limited Web site: http://www.ctihk.com/

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