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To adapt to the national “three networks integration” policies, the Group has been transforming from a wireless digital television equipment integrator to an operator of television broadcasting integrated businesses since 2010. With the business expansion and active operation in 2011, the Group has already obtained the operation rights on 9.2 million cable television subscribers in such provinces as Jiangxi, Anhui, Hebei and Shanxi for a term of 12 to 15 years, and the operation rights on the wireless television business in Hebei province. The Group has fully completed its transformation, and has established its position as an operator of television broadcasting integrated businesses in the industry.

For the six months ended 31 December 2012, the Group has been operating the following major business segments:

 

I) Digital cable television business

Based on the progress of its own development, in response to the general market and under the overall business plan of the Group, and capturing the opportunity brought from the “three networks integration” policies, the Group has made a transition from the wireless television operation to the digital cable television operation and actively provided solutions for digital cable television reform projects, achieving an improvement in research and development, design, production and sales and establishing its position as an operator of integrated television broadcasting business in the industry.

With the business expansion and active operation in 2012, the Group has already obtained the operation rights on 12.2 million cable television subscribers in such provinces as Jiangxi, Anhui, Hebei and Shanxi for a term of 12 to 15 years, and the operation rights on the wireless television value-added business in Hebei province. The Group has fully completed its transformation,

and has established its position as an operator of television broadcasting integrated businesses in the industry. The Group has achieved stable progress for its network construction project in the integration of the three networks. The revenue for the six months ended 31 December 2012 amounted to approximately HK$65.8 million (around 22% of the total revenue of the Group). The revenue comprised operational revenues from basic subscription and other value added technology as well as market service income arising from the 1,000,000

subscribers of the Hebei rural television network and sales of digital cable television business related products. The basic network construction for approximately 400,000 subscribers of broadcasting television in the rural areas is underway and expected to be completed in 2013.

With the assistance of externally engaged market and technology experts, the Group has made steady progress on the development of client channels for the technology development, products and services, which set up a solid platform for further sales of products in the cable market. The Group won the bid for supply of MOCA products in Ningxia Autonomous Region (throughout the province), and will commence the supply soon. The Group’s existing operation right on value-added business covers areas such as Anhui and Nanchang of Jiangxi province.

The Group has signed contracts on establishment and operation of value-added business for 5.5 million cable television subscribers. In Hebei province and Datong of Shanxi province, the Group has signed contracts on establishment and operation of basic television business for 3.7 million cable television subscribers.

The platform construction and testing for the 301 remote medical treatment project have been completed and the sale has already commenced, with contracted units and intended contracted units located in provinces and cities such as Shaanxi, Liaoning, Guangdong and Xinjiang. The convenience payment project throughout Hebei province cooperated with 河北省一卡通 (Hebei One-Card) and 北京海科融通 (Beijing Haike Rongtong) stepped into the stage of implementation.

 

II) Wireless digital television value-addedservices

The Group has signed contracts for the operation of wireless digital mobile television in Hebei province, under which 60,000 display panels will be installed in public areas and value-added advertising business will be carried out. During the first quarter of 2012, the Group has completed the construction of 1,000 display panels in public areas.

 

III) Wireless digital terrestrial television network equipment integration business

Steady progress has been made on the sales of set-top boxes and related products during the six months ended 31 December 2012. This business segment made less contribution to the net profit of the Group as a result of relatively substantial impact from the weak market.

 

IV) Information safety technology business

As a selected enterprise of China Telecom Group, the Group has participated in the construction of telecommunication base stations in Yunnan, Jiangsu, Hebei, Heilongjiang, Henan and Zhejiang provinces in China, leading the Group to enter into a lucrative telecommunication operators’ market with consumption capacity of hundreds of billions dollars every year. With the promotion of three networks integration in telecommunication, the business focuses of three largest operators have shifted to mobile internet and fiber to the home (“FTTH”). The Group’s newly developed base environment-controlling products and optical fiber quick connectors are completely compatible with the business modes of these telecom operators. In addition, the Group has been listed in the suppliers’ lists for centralized procurements of China Unicom and China Telecom Corporation and had already won the bid from, and commenced to make supply, to the Jilin branch of China Unicom. The telecommunication business will definitely be a new profit driver of the Group in the future. The system integration projects have brought much contribution to such areas as medical services, plant integration, and government’s centralized procurement by utilizing the Group’s leading encryption technology. With the growing coverage and continuous improvement of remote medical projects, the Group will continue to provide systems and equipment, and supporting software to service providers. The Group has won the bids and been shortlisted in several large government procurements such as Beihang University, China Southern Airlines, Xinhua Airlines and University of Technology.

 

V) Wireless digital audio products business

 

The demand from overseas customers in this business segment further increased as a result of the stronger demand from overseas market in 2012. The number of new customers in the export segment of the Group has been significantly increased. The Group’s market share has been growing correspondingly with the expanding scale of cooperation with the domestic and overseas clients over the past few years.