Elephant Picks Up SMS

Elephant Talk Communications is to acquire a majority equity interest in General System Technology Limited, known as WestSMS, a mobile value-added service provider in China. The Company will use this acquisition as the cornerstone in its transition to higher margin telecommunications services in China. In addition to WestSMS acquisition, ElephantTalk has completed negotiations for another equity investment in this sector to be announced shortly.

WestSMS, a newly developed and leading independent mobile value-added service provider in China, currently has more than 1 million monthly registered subscribers of its mobile phone short messaging service with revenues exceeding RMB10 million in 2003. The company has 100 employees with service coverage areas spanning thirty major cities and provinces in China. WestSMS recently signed an agreement with China Eastern Airline's Eastern Miles Program to provide customer relationship management (CRM) and marketing solutions to its frequent flyer program using WestSMS' mobile phone short message service infrastructure. This agreement is projected to boost subscriber totals to exceed 3 million at the end of 2004 with additional strong growth projected for 2005.

In the past two years, China has seen tremendous growth in the usage of Short Messaging Service (SMS) to mobile users. The growth has been driven by an explosive increase in the number of mobile phone subscribers, topping over 250 million in 2003. Average annual growth of mobile data usage and services is expected to increase over 100% over the next several years, surpassing Internet usage. China's Ministry of Information Industry figures show that the country's 260 million mobile phone users sent a total of 220 billion SMS messages last year to shore up the booming "thumb economy."

"In addition to our new business with China Eastern Airlines we plan to introduce a new value-added service to our subscribers by using SMS/IVR/WAP to buy lottery tickets," said Mr. Lin Xiao Jian, CEO of WestSMS. "Within seconds, our subscribers will receive a confirmation of their request to purchase their lottery ticket. The service will automatically inform the subscriber if he/she wins the lottery and a prize. We feel this will be an another big hit for WestSMS and open up additional high-margin markets for our wireless services".

"SMS is the most exciting and cost effective direct marketing and advertising method available to business. It can be interactive like the web, has an enormous reach like television, targets users like direct mail, and is ideal for brand reinforcement", said Mr. Russelle Choi, Chairman and CEO of ElephantTalk. "Most of the existing SMS service providers are focusing their resources on addressing the entertainment needs of mobile phone subscribers, while acknowledging the need of expanding market share in the area. Our long term strategy is to establish our core competence in developing business applications and serving the business needs of large corporate clients by leveraging the cost effective function of SMS and our expertise in wireless and telecommunications industry."

Posted to the site on 24th May 2004