With Stable Revenue of HK$ 6.33 Billion

(22 March 2013, Hong Kong) – Comba Telecom Systems Holdings Limited ("Comba Telecom" or "the Group", Hong Kong stock code: 2342), a global leading wireless enhancement solutions provider, announced today its audited annual results for the year ended 31 December 2012.

       In 2012, the Group recorded stable revenue amounting to HK$6.33 billion. The increasing number of mobile subscribers, along with the deepening penetration of smart devices and expansion of data traffic, drove the demand for wireless solutions but was offset by the CAPEX concerns of the mobile operators. Gross profit decreased by 30.6% to HK$1.62 billion and gross profit margin decreased to 25.5%, mainly due to the increase in the cost of sales caused by inflation, increasingly fierce competition in the telecommunications industry and the unrealized sales scalability of new products and businesses. Moreover, inventories write-off of HK$146 million was recorded. A net loss of HK$200 million was mainly due to the decrease in the overall gross profit margin and the increase in the operating expenses. The Board does not recommend any final dividend (2011: HK7 cents per ordinary share).

     Mr. Tony TL Fok, Chairman of Comba Telecom, said, “2012 was a year of pronounced economic uncertainty for many countries around the world resulting in a halt on the CAPEX plans by some mobile operators, which in turn affected the Group’s business. Despite these headwinds, the Group maintained its focus on product transformation and capturing the opportunities arising from the emerging markets. It is encouraging that the Group successfully penetrated a number of new markets and we see growing opportunities in certain overseas markets. For instance, global sporting events including Football World Cup, Summer Games, Winter Games and transportation network projects around the world will drive the demand for wireless enhancement solutions. Meanwhile, with an emphasis on profitability and liquidity, the Group has executed stringent cost control measures since the second half of 2012 to enhance operational efficiency. Hence, the ratios of selling and distribution costs and administrative expenses recorded notable decreases in the second half of 2012. As the measures have been in place for only a few months, the effects are expected to be fully revealed by 2013. We will maintain our vigilance and persistence, enhance the management and review the progress and effectiveness of the measures.”

      As a result of the ongoing investment in 3G mobile networks by the mobile operators, the Group’s 3G business rose by 32.6% to HK$2.71 billion, accounting for 42.8% of the total revenue of the Group. Revenue from the China Mobile Group decreased by 7.5% to HK$3.31 billion, while revenues from China Unicom Group and China Telecom Group increased by 4.3% and 9.1%, amounting to HK$1.39 billion and HK$460 million respectively. Through constant efforts in expanding the business in emerging markets and some Asian countries, revenue from international customers and core equipment manufacturers increased significantly by 20.9% to HK$1.03 billion, accounting for 16.3% of the total revenue.

       Driven by the ongoing replacement cycles of antennas and the continuous network build-outs by the mobile operators, revenue from antennas and subsystems business rose by 1.3% to HK$1.82 billion, accounting for 28.7% of the Group’s revenue. Many mobile operators expedited WLAN (Wi-Fi) deployment to cope with the growth of mobile data usage, enabling the revenue from wireless access and transmission business to increase by 2.1% to HK$510 million, accounting for 8.0% of the total revenue. As a result of the postponement of certain investments and inspections by PRC mobile operators, and the fact that revenue from some of the Group’s projects was not recognized in 2012, the revenue from wireless enhancement business decreased by 35.6% to HK$1.25 billion, accounting for 19.8% of the Group’s revenue. Revenue from services, including consultation, commissioning, network optimization, project management, and after-sales maintenance services, increased significantly by 30.2% to HK$2.75 billion and accounted for 43.5% of the total revenue, mainly due to the increase in data traffic and growing complexity of network systems.

     Innovation is one of the core values of the Group through which it differentiates itself from its peers. R&D costs and expenses increased slightly by 4.1% to HK$380 million, representing 5.9% of the revenue (2011: 5.7%). The increased investment in R&D is necessary to maintain the Group’s competitive advantages and continuous investments were made in the development and expansion of the product portfolios of Indoor Broadband Wireless Access System (“IB-WAS”) and 2G, 3G, WLAN (WiFi) and Long Term Evolution (“LTE”) mobile networks.

    The Group continued to focus on developing advanced and high value-added products for customers. The development of IB-WAS, which is one of the small cell solutions, has made tremendous progress. To date, mobile networks within various provinces in China have deployed the Group’s IB-WAS for commercial use, while a number of other provinces and municipalities have also commenced trial runs. The Group will accelerate the development of the small cell product portfolio and drive the commercialization in the PRC to achieve greater economies of scale in 2013. The Group is confident that small cell solutions will be the next growth engine of the Group in the near future.

     Mr. Fok added, “Data traffic and heterogeneous networks management are undeniably the major areas that every mobile operator needs to place more effort and investment in the future. Mobile operators must scale up their networks in terms of capacity, efficiency and intelligence to support the exponential growth of data traffic, while maximizing their network value and enhancing network quality for subscriber retention and growth. Network upgrades include not only LTE deployment, but also maximization of existing networks’ capacity and efficiency where wireless enhancement could represent one of the best solutions. This will open countless opportunities to most wireless equipment suppliers. As a market leader in wireless solutions, Comba Telecom is LTE-ready and is well-poised to seize the opportunities via our innovative products and solutions, including IB-WAS, MDAS, LTE and satellite emergency communication, etc, coupled with our uncompromising services to cater for the needs of our customers.”

    Mr. Fok concluded, “The behavior and demand of mobile users are undergoing accelerating changes. Comba Telecom strongly believes that its long-term strategy, which is focused on value creation for customers, is the right one to cope with the stream of both challenges and opportunities. The Group reaffirms its commitment to R&D with a planned investment in small cells and other strategic products in order to drive innovation and sustainable differentiation. Meanwhile, we will continue to strengthen our structure, streamline our processes, adopt stringent cost control measures and strive to maximize our operational efficiency, in order to generate optimal returns to our shareholders.”

 

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