China Wireless first half profit down to HK$119mn

Despite 44.0% rise in turnover, the group’s “Coolpad” 3G smartphones in the mid- to low-end market in China faced tough competition.

China Wireless Technologies Limited (“China Wireless”), China’s leading provider of integrated wireless data solutions and smartphones, announced its unaudited interim results for the six months ended 30 June 2011. Benefiting from rapid growth of 3G subscribers in Mainland China during the first half of 2011, China Wireless recorded strong sales volume increase for its “Coolpad” 3G smartphones, leading to a remarkable 44.0% rise in turnover for the first half year to approximately HK$3,027 million compared to HK$2,103 million reported for the same period last year. During the reporting period, the Group strategically changed the product mix to increase the sales volume of mid- to low-end Coolpad smartphones. However, due to keen competition in the mid- to low-end mobile phone market, the average selling price of Coolpad smartphones for the aforesaid segment decreased, resulting in a general gross profit decline of 18.2% to HK$508 million; gross profit margin was 16.8%. Net profit attributable to owners of the Company was HK$119 million. Basic earnings per ordinary share and diluted earnings per ordinary share were HK5.33 cents and HK5.20 cents respectively. The Board suggested distributing a dividend of HK1.0 cent per share for the six months ended 30 June.

Mr. Guo Deying, Chairman of China Wireless said, “Despite keen competition in the mid- to low-end 3G mobile phone market in China, we have proactively equipped ourselves with a 3G lineup of products that completely covers all of the 3G networks, including TD-SCDMA, CDMA1X (EVCO) and WCDMA.

In addition, the Group continued to further develop products based on the Android platform, launching different Coolpad branded products, and enlarging the user base and brand reputation of Coolpad smartphones. In an effort to transform Coolpad into a leader of the 3G smartphone market, the Group has taken a series of measures to enhance cost control, optimize workflow of different departments in the Group, and improve R&D in relation to the smartphones field.”

During the reporting period, the Group successfully introduced numerous 3G smartphone models to the vibrant domestic 3G mobile market. The sale volume of 3G Coolpad smartphone surged by 212.2% year on year to 4.43 million units, with revenue increasing by 64.6% to HK$2,962 million compared to HK$1,800 million for the same period last year, representing the Group’s main revenue stream. Moreover, revenue contributions from this segment rose significantly from 85.6% in the first half of 2010 to 97.9% in the first half of 2011, according to a China Wireless report.

During the reporting period, the Group stopped developing 2G smartphones, and directed all of its R&D resources toward 3G smartphones. Revenue from 2G Coolpad smartphones decreased to HK$52.50 million compared to HK$286 million for the same period in 2010, while sales volume plunged to 163,000 units in the first half of 2011 in contrast to 560,000 units for the corresponding period of 2010.