CTEL Hong Kong Television Network Ltd. (MM)

CTI Announced 2004 Interim Results - Unprecedented Value and Choice * Group turnover of HK$572 million, down 13% YoY, due to IDD price weakness. HONG KONG, May 19 /PRNewswire-FirstCall/ -- City Telecom (HK) Limited ("The Group") today announced the interim results of 2004 for the six months ended 29th February 2004. Despite the intense competition in the telecommunications market, FTNS recorded satisfactory results that brought the Group to a new level of maturity. The board of directors has resolved an interim dividend of HK$0.015 (2003:HK$0.05) per ordinary share for the six months ended 29th February 2004. During the period under review, our growth FTNS segment performed strongly with this segment rising to 43% of our total revenues. Profit attributable to shareholders was HK$35 million in this reporting period, a YoY fall of 68% (50% excluding the USC rebate in 1H03). Total revenue fell 13% to HK$572 million, mainly due to the price pressure on our IDD business. Despite intense price competition across our businesses, our group's gross margin actually increased YoY from 63% to 71% (excluding the USC rebate in 1H03) in response to the improving revenue mix towards the more profitable FTNS segment. As such, our gross profit YoY fall of 2% to HK$404 million (excluding the USC rebate in 1H03), was substantially less than our revenue decline. Total operating costs of IDD business (excluding the USC rebate in 1H03) dropped by 27% to HK$256 million compared to last corresponding period. For FTNS, operating costs increased by 22% to HK$285 million, mainly due to our investment made in network and subscriber acquisition, together with the launch of our pay-TV service. As a result of the above, our operating profit (excluding the USC rebate in 1H03) dropped by 55% to HK$36 million. Operating loss from FTNS business was reduced by 16% to HK$36 million but our IDD business recorded a 41% fall to HK$71million. "At City Telecom, we strive to provide innovative diversified products, at affordable prices for the mass market, and we are committed to invest for the benefit of our shareholders and the community of Hong Kong," said Ricky Wong, chairman of City Telecom (H.K.) Limited. BUSINESS REVIEW Fixed Telecommunications Network Services (FTNS) During the period under review, we have prioritized our local fixed line business, expanding our market share with an installed base of 194,000 (today: 208,000) lines, averaging approximately 8,000 net line additions per month. On our broadband Internet access business, we also reached a customer base of approximately 189,000 (today: 195,000), although growth has matured to 2,800 line additions per month. In addition, in last August 2003, we launched our pay-TV service, a third revenue stream on our underlying Metro Ethernet network. Our enriched content offering now consists of 33 channels (up from seven channels at launch) of quality television programming and 11 channels of interactive applications. We will continue our investment in the pay-TV segment, subject to demand take-up. As of 29th February 2004, we had secured 7,000 (today: 18,000) pay-TV subscribers. International Telecommunications Services (IDD) During the reviewing period, the Group succeeded in re-establishing its market share to 22% (up from 21% in 1H03), resulting in a 18% volume increase to 492 million minutes. However, a hostile market environment between existing and new entrants in the market, created an adverse fall in our average revenue yield, which resulted in a significant drop of revenue to the Group. In terms of traffic routes, China is still our number one route that accounted for 69% of our total traffic. The second and third most popular routes remained to be the US and Canada. PROSPECTS The first half of this year has been characterized by the substantial growth in the Group's fixed telecom network business, reducing our traditional dependence on IDD. Started in 2003, we are on schedule to deepen the penetration of our fiber backbone to majority million of our 1.2 million Metro Ethernet access homes within calendar year 2004. This progress, will allow us to lower our costs, improve service quality and provide unparalleled capacity to offer new services to our customers However, the overall telecom operating environment in Hong Kong remains intensely competitive. The Group has seen some softening in the affordability of tariffs of various telecom services. Nevertheless, the penetration for our numerous FTNS offerings is expected to rise continuously through our efforts in marketing and technology advancement, and we are confident that the rate of decline in our IDD business can be slowed. Network coverage has always been a key for business development. Upon the review period in the past two years, such development has been reactivated and we target to extend the existing 1.2 million households network coverage by increment of more than 30%. "As one of the leading fixed telecom network operators in Hong Kong with superior network, established brandname, premium customer services, aggressive marketing strategies and effective sales channels, we are well-positioned to deliver growth and value to our shareholders and for the benefit of Hong Kong," Mr. Wong concluded. About City Telecom Established in 1992, City Telecom (H.K.) Limited (NASDAQ:CTEL)(SEHK: 1137) provides integrated telecommunications services in Hong Kong. CTI's wholly owned subsidiary, Hong Kong Broadband Network Limited (HKBN), has deployed a Metro Ethernet network of 1.2 million homes passed and to date, has achieved an aggregate broadband, voice and Pay-TV base in excess of 400,000 subscriptions. Additional information on City Telecom can be found at http://www.ctihk.com/. For media enquiries, please contact: Corporate Communications Jessie Cheng Tel: (852) 3145 4118 Fax: (852) 2199 8372 Email: Investor Relations NiQ Lai Tel: (852) 3145 4710 Fax: (852) 3145 8445 Email: DATASOURCE: City Telecom (HK) Limited CONTACT: Corporate Communications - Jessie Cheng, +852-3145-4118, or fax, +852-2199-8372, , or Investor Relations - NiQ Lai, +852-3145-4710, or fax, +852-3145-8445, , both of City Telecom (HK) Limited Web site: http://www.ctihk.com/

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