SUNDAY focus on 3G future

September 14, 2004

SUNDAY Communications 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. (£1 = HK$13.35)

"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." said Group Managing Director Bruce Hicks.

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).

SUNDAY's posted 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.

"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 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.

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. "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."