Elephant Talk Communications, Inc. announced today that it has entered into a definitive agreement to acquire a majority equity interest in General System Technology Limited, known as WestSMS, an independent 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, further accelerating the company's move into the profitable and rapidly expanding wireless value-added service industry.

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 CNY10 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."

The transaction is expected to close by Q2 of 2004 after completion of due diligence and obtaining the necessary regulatory approvals.


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