Mobile Communications Services segment continued to be a major profit contributor of the Group. Turnover for the segment during the year under review, which includes both the Mobile Virtual Network Operator (“MVNO”) and the two-way trunked radio businesses, declined 6% to HK$99,799,000. The segment accounted for 46% of Group’s turnover or 47% of Group’s turnover from continuing operations. Operating profit declined 28% to HK$6,408,000 when compared to the last corresponding year. These results reflected the aftermath of the financial industry meltdown that had impacted the customers and the increased competitive environment, both of which continued to drive the pricing downward and erode profit margin.

During the year, MVNO’s turnover reached HK$92,501,000, a decline of 5% versus last year. Gross margin declined 5% point to 35% and operating profit lowered to HK$8,245,000, a decrease of 33% when compared to a year before.

During the year, MVNO was aggressively targeting new market segments and managed to raise its net post-paid subscribers by 9%. However, this increase was more than offset by a number of factors that negatively impacted the business. The most significant was the financial turmoil in late 2008 that accelerated the customers moving their operations into China, a factor that reduced cross border travel by business executives for local manufacturers and multinational corporations. This had a profound negative impact on usage and churn of MVNO’s dual number single SIM mobile service. Second, major mobile operators were stepping up their marketing efforts with aggressive advertising, heavily discounted services and subsidised mobile devices, which resulted in driving the average selling price downward. Third, the increasing popularity of high-end PDA devices and the 3G data services, which the Group was unable to offer, increased the stickiness of the mobile services and reduced the overall addressable churn market.

Despite the challenging market conditions, the Group is stepping up its investment and marketing effort to address some of the issues. It is actively working with its partners to evaluate various options, one of which includes upgrading its offering to include 3G voice and mobile data service to strengthen its leading position in the cross border communication services. These potential enhanced services when available will allow the Group to compete more effectively by improving the quality of service and broadening of offerings to meet the growing demand in the cross border mobile data communications.

The trunked radio business is one of the few two-way radio licensed operators in Hong Kong. The Group through co operation with its partner in Shenzhen, China maintains a cross border two-way radio services to companies in the transportation industry. With its solid customer base from the non-profit organization, logistics, transportation and airlines industries, the Group’s current analogue infrastructure is unable to offer the enhanced value-added services and applications demanded by the customers. The Group is exploring various strategic options to offer its customer the latest digital two-way radio services in the future. During the year under review, turnover for the business dropped 16% from last year to HK$7,298,000. Gross profit margin improved to 31% from 24% reflecting a mix of lower handset sales. The business also incurred an operating loss of HK$1,142,000, 11% more than the prior year.