Neo Telemedia Ltd, the telecommunication products and services distributor listed on the Growth Enterprise Market, utilized HK$273 million to acquire the 100-percent stake of HCH Investments Ltd to venture into the satellite telecommunication operator business.

Neo Telemedia will pay the purchase price by the following three segments: cash in the amount of HK$27.32 million; allotment and issuance of 119 million consideration shares at HK$0.72 each at an aggregate value of HK$85.68 million; and a convertible note issuance in the principal amount of HK$160 million. HCH Investments can choose to convert the note into Neo Telemedia shares at the conversion price of HK$2.5 per conversion share within a three-year period.

Neo Telemedia estimated that the HCH investment can obtain an approximately 7.29 percent of the total enlarged capital if it chooses to convert all the conversion shares and after getting all the consideration shares.

"The acquisition represents the company's first step to venture into the mainland telecommunication industry by obtaining the HCH Investments' satellite telecommunication license on the mainland and the satellite communication technology developed by HCH Investments," Neo Telemedia Chief Executive Officer Fred Zhang told a press conference on Wednesday.

He said the acquisition of HCH Investments should make contributions to the company's net profits and cash flows by the end of this year as satellite communication services revenue would contribute more than 50 percent of the company's total income.

Neo Telemedia will launch its own satellite into orbit in 2014 to capture the growing demand for satellite communication services. The operation of satellite communication services will attract more corporations, telecommunication operators and government units to become Neo Telemedia's clients.

The company refused to disclose the exact investment amount for launching its own satellite. Currently, the total costs involved in any one satellite launch could be between $300 million and $400 million.

Neo Telemedia's company secretary William Yuen did not rule out the company issuing more shares in other rounds of financing activities after the acquisition.

The issue price for every consideration share at HK$0.72 per share represents a discount of 11 percent compared to the company's closing share price on Monday; while the conversion price of HK$2.5 per share for every conversion share represents a premium of 213 percent compared to Monday's share closing price.

oswald@chinadailyhk.com

(HK Edition 01/10/2013 page2)