Marketingforce Management Ltd — M&A Activity 2000

Mar 2, 2000

Listed Company Information

CITY TELECOM<1137> - Announcement The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. CITY TELECOM (H.K.) LIMITED (Incorporated in Hong Kong with limited liability under the Companies Ordinance) DISCLOSEABLE TRANSACTION Transfer of dial-up internet access business to its subsidiary Hong Kong Broadband Network Limited. Subscription of shares by KDD Corporation. Pursuant to an agreement dated 1st March, 2000, City Telecom (H.K.) Limited ("CTI") transferred to its wholly-owned subsidiary Hong Kong Broadband Network Limited ("HKBN") the existing dial-up internet access services currently operated by CTI for an amount of HK$36,249,751.00 (based on the unaudited net book value of the assets transferred as at 29th February, 2000) to be satisfied by the allotment and issue of an additional 75,000 new HKBN shares to CTI or its wholly-owned subsidiary. The reason for this transfer is to enable CTI to group all of its internet access related business into a new company incorporated for this purpose. Pursuant to a subscription agreement dated 1st March, 2000 between CTI, KDD Corporation ("KDD") (the "KDD Subscription") and HKBN, KDD agreed to subscribe 15,000 new HKBN shares for a total subscription price of HK$225,000,000 (determined on arms length terms) paid in cash representing 15% of the enlarged issued share capital of HKBN and approximately 33% of net tangible assets of CTI and its subsidiaries as at 31st August, 1999 as adjusted for CTI's listing on NASDAQ in November 1999. Signing and completion of the subscription took place on the same day. HKBN intends to use the proceeds to develop its wireless broadband internet access related services. KDD shall have the right to appoint one out of seven directors to be appointed to the board of HKBN. KDD, an independent third party prior to its subscription of shares in HKBN, is one of CTI's existing international telecommunications service providers and suppliers. It is the largest international telecommunications carrier in Japan. The directors consider that KDD's experience and knowhow in wireless technology will contribute towards the development of HKBN's business and that the terms of the KDD Subscription are fair and reasonable as far as CTI and its shareholders are concerned. CTI and KDD will also co-operate to seek opportunities to support the growth and development of HKBN by providing services and products to HKBN including network access, facilities management and system integration services. The detailed terms of such co-operation are being discussed between the parties. CTI will comply with its obligations under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in respect of any transactions entered into between CTI or HKBN and KDD. A circular regarding the above will be despatched to CTI's shareholders as soon as practicable. By order of the Board Wong Wai Kay, Ricky Chairman Hong Kong, 1st March, 2000