NETEL Technology (Holdings) Ltd. (the Group) is principally engaged in the business of providing IP-based telecommunication services. In view of the deregulation of the global telecommunication market and rapid growth of the Internet, particularly in the Asia Pacific region, in favour of IP-based telecommunication services, the Group recognized the opportunity to set up a new infrastructure enabling the convergence and leverage of the strengths of conventional telephone network and the VoIP technology.

The Group carries out its telecommunication services principally through two of its wholly-owned subsidiaries, Netel Technology Ltd. (NTL) and Pacific Long Distance Telephone Corp. Ltd. (PLDT). NTL is principally engaged in the provision of VoIP telephony services and PLDT mainly provides long distance call services through the Group's prepaid telephone cards system. In March 2001, the Group integrated PLDT's circuit-switched system (conventional phone based) into NTL's packet-switched system (IP based) to build up an efficient network infrastructure platform which enables the Group to provide competitive long distance call services to its customers. By utilizing the integrated network infrastructure, the Group is able to offer services to users at a cost that is generally lower than that charged by conventional carriers.

To further capture a larger market share, the Group has finished developing and integrating a prototype CPE, the NVP, to facilitate the customers' utilization of the Group's services. The NVP is a VoIP access gateway which targets to provide intra-company voice and fax traffic over the corporate IP network.

Objectives

Based on the increasing number of computer users, business automation, the ever-growing demand for borderless communication tools and applications, the Directors believe that there is an enormous growth potential in IP-based applications both in business and domestic sectors.

The Directors also believe that the Group, with its existing technology and equipment, qualified and experienced team as well as the established clientele in the retail telecommunications business, will be able to capitalize the growth potential in the market of IP-based applications, and the anticipated de-regulation of telecommunications industries in Asian countries.

The Group strives to become a dominant provider of IP-based telecommunication services and, aims to provide one-stop solutions and serves as a regional hub for both business and individual customers in the Asia Pacific region.

The Group's business objectives and development strategies formulated by the Directors comprise three functional areas:

Strengths

The Directors believe that the Group is well-positioned to capture a significant share of the growing worldwide market in the provision of IP-based telecommunication services given its strengths and competitive advantages in the following areas:

• the technological knowhow of its management and technical personnel in the telecommunications industry which was developed through years of experience;

• the capability of its research and development team to build in value-added services to the existing products;

• its experience in market deregulation an liberalization gained in Hong Kong which is the telecommunications hub in the Asia Pacific region;

• its strong customer base established through 700 independent retail outlets, dealers and its self-operated outlets namely Lotus Club among ethnic groups, such as Filipinos and Indonesians.

The Successful Model - Leverage