Just a few weeks after sanctions from China Mobile caused Linktone (LTON) to suspend some mobile value-added services in China, Linktone has announced the signing of a definitive agreement to acquire a Wireless Application Protocol (WAP) services company, Beijing Cosmos Digital Technology Company Ltd.

Cosmos Digital is a privately-held provider of Wireless Application Protocol (WAP) services to China Unicom, one of the two major mobile operators in China.

With this strategic acquisition, Linktone expects to strengthen its overall WAP service portfolio and development capabilities, increase its share of the rapidly growing 2.5G WVAS market, and enhance its relationship with China Unicom. Linktone's business with China Unicom accounted for 13% of its gross revenues for the third quarter ended September 30, 2004.

According to China Unicom, Cosmos Digital ranked sixth in revenue contribution among all WAP WVAS providers on its nationwide network in December 2004, up from #10 in June 2004. Cosmos Digital's monthly revenues grew an average of 18% per month sequentially during the second half of 2004.

The definitive agreement calls for Linktone's acquisition of 100% of the outstanding shares of Cosmos Digital in cash, which will be paid from the Linktone's existing cash reserves. Linktone currently expects the transaction to close in February 2005, subject to required China regulatory approval and other customary closing conditions. Linktone anticipates that the acquisition of Cosmos Digital will be accretive to earnings for fiscal year 2005. The financial terms of the definitive agreement between Linktone and Cosmos Digital have not been disclosed.


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