ZTC Telecommunications Plc “ZTC” formerly Cassian Investments Plc was incorporated in the England and Wales in 2000 as a cash shell in order to identify a single transaction whereby the Company would acquire, or would be acquired by, an undertaking suitable for admission to the Official List or AIM.  

 

During March 2007 ZTC acquired entire issued share capital of Praise Ease Ltd. Praise Ease is the Hong Kong registered holding company of Zhong Tian Communications Equipment Co Ltd “ZTCE”, a mobile phone manufacturer based and registered in Shenzen, PRC.  

 

The consideration for the Praise Ease Acquisition was satisfied by the issue of 70,000,000 New Ordinary Shares to the Vendors, credited as fully paid at 20p on Completion, therefore valuing such consideration at £14,000,000. A deferred consideration of up to 15,000,000 additional New Ordinary Shares be payable dependent on profits for the year ending 30 June 2007. Further details can be found in paragraph 13.7 of Part VI of the Admission document. Following Admission to AIM on 19th March 2007, ZTC’s business became that of Praise Ease.  

 

 

 

ZTCE, the trading subsidiary of Praise Ease, is located in the Longgang District of Shenzhen, China and designs, assembles and distributes mobile telephone handsets. The company, founded in June 2003, commenced business as an OEM handset distributor with an initial focus on southern China. The scope and nature of the business changed fundamentally in 2005, when ZTCE was awarded a handset manufacturing license, enabling the company to design, assemble and market its own handsets under the “ZTC” brand. The company has developed an extensive distribution network in China and achieved sales of RMB195 million (around £13 million) and net profit of RMB26 million (around £1.7 million) in the year ended June 2006.  

 

ZTCE’s handsets are primarily aimed at the estimated 800 million Chinese who reside in the lesser developed north, central and western regions of PRC. This focus is achieved through ZTCE’s strategy of producing handsets that are “Fashionable, Economical and Practical”.  

 

Zhong Tian buys mobile phone components from suppliers and assembles new generation ‘ultra-slim’ handsets using its own and contracted outer-casing designs. Zhong Tian was credited with ISO9001 (2000 edition) on 17 January 2006.  

 

At June 2006 the company had over 280 employees based in some 4,000sqm of workshop floor space. The facility is located on an industrial park site which is on a long term lease.  

 

Currently there are four labour-intensive assembly lines, operating one shift, with an output potential of 80-120 handsets per hour each, depending upon the complexity of the handset. This equates to a potential annual capacity of 600,000-900,000 handsets based on a 46 week year.   

 

The company’s handsets typically retail in the RMB800-RMB2000 (approximately £50 -£130) price range which is at the low-cost end of the market. Specifications for the cheaper end of the recent or current mobile phone product range usually contain a 1.6’’ colour screen, music audio and a camera with 300K pixel resolution whilst the more expensive handset has a 2.8’’ screen, music audio, video, MMS & PDA function and camera with at least 2.0 million pixels.  

 

The marketing strategy has focused on developing an extensive retail and distribution network concentrating on smaller cities and rural areas rather than the major urban areas where cell phone penetration rates are high. ZTCE Tian currently has distribution agreements, which are typically of twelve months duration, with:  

 

-three wholesalers who are entitled to market nationally but focus on urban areas;  

 

-thirty nine provincial distributors with at least one distributor in 23 of the 30 provinces of China. Included are ten core distributors covering Jiangsu, Hunan, Heilongjiang, Zhejiang, Liaoning, Sichuan, Hubei, Henan, Shandong and Shaanxi provinces. Three of these core distributors are located in the east with the balance being north, central and western provinces. The core distributors in turn 26 collectively have 564 outlets.