Telecom & Wireless

Focus Media Bids Farewell To Wireless Advertising

China's Focus Media (FMCN), China's largest digital media group, today provided an update on the expected charges resulting from the restructuring of its CGEN in-store advertising network and announced the termination of its remaining wireless advertising business.

Focus Media said it will terminate its remaining wireless advertising and interactive marketing business due to changes in market conditions. As a result, Focus Media will incur additional one-time non-cash impairment charges of approximately USD20 million in the fourth quarter of 2008, representing all of its remaining tangible and intangible assets relating to its wireless advertising business.

"We faced an extremely challenging advertising environment towards the end of the third quarter and in the fourth quarter. The recent global financial turmoil and slowdown in consumer demand in the US and European markets have had a significant negative impact on the Chinese economy as well as on the mindset of corporate decision makers in China. The macro headwind we are facing is the most severe in the modern history of the Chinese advertising industry. In particular, our Internet advertising business saw online advertising spending slowing after the Beijing Olympics," stated Dr. Tan Zhi, CEO of Focus Media, a few weeks ago when the company reported its financial results for the third quarter of 2008.

Also, as previously announced on November 11, 2008, the company has now finalized its restructuring plan for its CGEN in-store advertising business. According to the terms and conditions in the share purchase agreement dated as of December 8, 2007, in addition to the initial payment of USD168 million in cash paid, Focus Media was to make additional payments of up to USD182 million, partly in cash and partly in Focus Media ordinary shares valued at the per share equivalent of USUSD53.42 per ADS. This was contingent upon CGEN meeting certain earnings targets during the twenty four month period following the closing of the transaction.

Because the 2008 performance of CGEN's in-store advertising business failed to reach the minimum conditions required for any additional earn-out payment, Focus Media has terminated the earn-out provisions in the CGEN share purchase agreement and will make no further payments relating to CGEN acquisition.

Focus Media plans to restructure CGEN's current in-store advertising business. As a result, Focus Media expects to incur non-cash one-time restructuring charge of approximately USD200 million in the fourth quarter of 2008.

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