GUANGZHOU, China, June 11 /Xinhua-PRNewswire/ -- Guangzhou Global Telecom Inc. (OTC Bulletin Board: GZGT), a wholesale distributor of mobile phone handsets, pre-paid calling cards and mobile handset value-added service provider in the PRC, has issued an open letter to shareholders. This letter is intended to provide a factual account of the Company's current line of business and address certain shareholder questions.
Guangzhou Global Telecom is a wholesale distributor of wireless products and services. Operating in Guangzhou, the heart of one of China's leading commercial and manufacturing regions, Guangzhou Global Telecom has established itself as a leading distributor, having formed distribution agreements with top Chinese telecom providers China Telecom, China Unicom and China Mobile as well as handset manufacturers Nokia, Rowa, Gionee, and Konka. The Company also currently owns and operates ten distribution and retail locations in Guangzhou.
Guangzhou Global Telecom's mobile telecommunications products and services include cell phones, phone calling cards and value-added services. To strengthen its position in the marketplace, the Company is opening additional locations as well as launching a next-generation Mobile Messaging Service (MMS). In addition to dissemination of information, the GZGT MMS(TM) will facilitate critical Company management functions such as meeting reminders, location changes, field reports, etc.
Within 2 weeks after setting up the branch in Zhengzhou, the Company signed a LOI with Zhengzhou Wangtian Electronic Technology Ltd. ("Wangtian") to acquire a 60% equity interest in Wangtian by issuing approximately 300,000 restricted common stocks to the shareholders of the Company. Please see Company PR June 7th, 2007 for more information on this transaction. In addition, the Company has set up two branches in Zhengzhou and Wuhan respectively within the recent 2 weeks. The movement can show our aggressive motivation to expand our network into new cities and provinces other than Guangzhou. With the expanding network, we can persuade more handset manufacturers to deliver products through our network. Furthermore, by developing a larger infrastructure, the Company will be able to sell more value-added services, which will increase Company margins and give us a competitive advantage over smaller companies in our market.
China has become the world's largest mobile telecommunications market. By the end of 2006, nearly 500 million Chinese citizens used mobile phones. This represents 37 percent of the population. In 2006 alone, more than 48 million people purchased their first mobile phones and projections indicate another 50 million more first time users will purchase in 2007.
China's urban markets are currently saturated with mobile phones, and by 2010 almost half of China's 1.3 billion people are expected to be using mobile phones, according to China Mobile. In addition to the size of the overall opportunity, marketers should note that 25 percent of mobile subscribers in China are between 20 to 24 years old. With the new 3G technology adopted, most of the mobile phone users will buy new phones to adapt the new 3G system. Ever changing technologies and features in handsets and related products, constantly create new opportunities with Company's current customer base.
Most Chinese mobile phone users buy their phones outright and pay by the call, and handset makers have more flexibility than in the West when adding functions to their handsets instead of reselling products configured by the carriers. Even customers, who can't afford a landline, including China's middle class, are excited about becoming mobile customers.
As evidenced by financials submitted to the SEC, The Company has seen revenue growth since its inception in 2004. In 2005, the Company's first full year in existence, Guangzhou Global Telecom had revenues of $6.7 million. Then in 2006 revenues rose by 91%, to $12.8 million. In 2007, the Company expects an increase in revenues by 44%, to 18.4 million, driven by increased sales in existing stores, as well as sales from additional regional retail centers.
During the three months ended March 31, 2007, revenues increased by 14.8% compared to the same period ended in 2006. The increase of revenue has mainly contributed to more acceptances of our products and services.
The gross margin dropped from 16% during the three months ended March 31, 2006 to 3% for the same period of 2007. The decrease is mainly due to China Mobile Guangzhou Branch changing its sales model, which left a thinner margin for agencies but took certain marketing functions itself. As a result, the decrease of the gross margin resulted in the decrease of selling expenses in the meantime.
As mentioned above, selling, general and administrative expenses decreased by 79% compare to the same period ended in 2006. This decrease is primarily due to the sharp decrease of advertising and marketing expenses.
Further, the Company received $500,000 in funding in April 2007 and the Company is confident it will raise the gross margins and bottom line.
Yankuan Li, CEO of Guangzhou Global Telecom states, "The Company is aware of the massive media campaign surrounding our company and our stock, good and bad. Much of what is being said is out of our control and the Company would like to distance itself from much of what is being circulated. One thing that we suggest to all potential investors is to speak to a registered investment advisor before making any investment. That being said, the fact is that we are a growing company inside one of the greatest growing wireless markets in the world. We are open and available to talk to our shareholders, brokers, and media to address any questions, comments, or concerns that they might have."
About Guangzhou Global Telecom
Guangzhou Global Telecom Inc. is a national wholesale distributor of mobile phone handset and pre-paid calling card and provider of mobile handset value-added services. Maintaining cooperative relationships with China Telecom, China Mobile and China Unicom, the Company seeks to become the largest sales and distribution center of mobile phones, mobile phone parts and prepaid mobile phone cards in China. GZGT plans to introduce new software and services through an expanded network of regional and neighborhood service centers, shops and virtual stores. For details, please visit our website at http://www.guangzhouglobaltelecom.com .
Safe Harbor Statement
Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
For more information, please contact:
Yankuan Li, CEO