Mobile Payment Magazine

TelChina and China Mobile to Build Mobile Payment Solution With .TEL Extension

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TelChina and China Mobile have entered into a strategic relationship to develop Mobile-Pay services on the .tel platform, according to Telnic Limited, the registry operator for the .tel top level domain (TLD).

“As .tel combines advantages of both the Internet and telecommunications, it will be able to provide an efficient and integrated communications platform for customers of China Mobile in the future. The engagement levels of .tel owners will also bring new vitality to Mobile-Pay, attracting more people to use their mobile phones in making payments, which in turn will increase revenues for operators,” said Lucy Wang, CEO of TelChina.

Telnic announced that project development will be divided into several phases. The first phase is expected to be live in early May, 2011, which will enable China Mobile customers to purchase and renew their .tel names via a Mobile-Pay portal using their mobile devices.

Following the implementation of the mobile payment solution, users will also be able to use their China Mobile credits to pay in part or full for their .tel names later this year.

According to Xie Gang, China Mobile’s Mobile-Pay spokesperson, “Mobile-Pay is migrating from its 1.0 era, which is mainly based on SMS, to its 2.0 era, which is based on WAP and sensor-based terminals. This collaboration with TelChina will not only help customers simplify the payment process, but also provide an optimized platform for China Mobile services. On this platform, users will not have to log on to various websites for payment, but accomplish it through the clicking of a Mobile-Pay link on a .tel page.”

China Mobile will also create a dedicated channel for .tel users to  pay for online purchases and other services such as  utility bills and cable TV subscriptions.

Using China Mobile’s PSTN and IP network, through web, SMS, WAP and IVR interfaces, customers will be also  able to fulfill e-commerce operations such as opening an account, checking their balance, submitting payments and withdrawing cash.

Source: PR Newswire

Mobile Payment Solutions Provider Trunkbow Annunces Record 2010 Financial Results

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Trunkbow International Holdings Limited, a provider of Mobile Payment Solutions (“MPS”) and Mobile Value Added Solutions (“MVAS”) in the PRC, today announced financial results for its fourth quarter and business year ended in December 31, 2010.

Fourth Quarter 2010 Highlights

  • Net revenue increased 200.3% year-over-year to $13.7 million
  • Gross profit increased 127.8% year-over-year to $10.1 million
  • Net income increased 154.1% year-over-year to $8.2 million, or $0.25 per diluted share
  • MPS gross revenue grew 487.1% to $7.0 million
  • MVAS gross revenue grew 105.3% to $6.9 million

2010 Full-Year Highlights

  • Net revenue increased 81.6% year-over-year to $24.4 million
  • Gross profit increased 73.6% year-over-year to $19.5 million
  • Net income increased 63.3% year-over-year to $13.5 million, or $0.44 per diluted share
  • MPS gross revenue grew 24.9% to $12.7 million
  • MVAS gross revenue grew 265.6% to $12.2 million

“We are extremely pleased with our results in the quarter that close a year of many important achievements.  We delivered strong growth in revenue and net income in 2010, and we continued to make progress in the roll-out of our MPS solutions,” said Mr. Qiang Li, Trunkbow’s Chief Executive Officer. “Subsequent to the end of the quarter we completed our initial public offering on the NASDAQ Global Market and raised $20 million in gross proceeds to fund the aggressive deployment of our MPS solution in 2011. We expect our growth momentum to continue as we expand into new provinces and reach agreements with additional carriers, and we look forward to reporting on our progress as we reach important milestones.”

Fourth quarter 2010 Results

Net revenue in the fourth quarter of 2010 was $13.7 million, an increase of 200.3% year-over-year. Gross revenue from MPS grew 487.1% to $7.0 million, driven by our geographic expansion into additional provinces. Gross revenue from MVAS grew 105.3% to $6.9 million from the fourth quarter of 2010, driven by new applications on our MVAS platforms, including Color Numbering and the Mobile Business Card. MPS and MVAS accounted for 50.5% and 49.5% of revenues, respectively.

Cost of revenue in the fourth quarter of 2010 was $3.6 million, compared to $0.1 million in the same period of 2009. The increase in cost of revenue was primarily driven by greater scale and the build-out of Trunkbow’s MPS platform.

Gross profit in the fourth quarter of 2010 was $10.1 million, an increase of 127.8% year-over-year. Gross margin was 73.6% in the fourth quarter of 2010, down from 97.0% in the year-ago quarter.  The year-over-year decline in gross margin was primarily due to sales of lower-margin point-of-sale systems, which carry margins below the corporate average.

Operating expenses in the fourth quarter of 2010 were $1.9 million, an increase of 65.0% year-over-year, driven primarily by the increase in selling expenses to support the roll-out of MPS as well by an increase in R&D expenses to position the Company for future growth. Operating expenses were 13.6% of its fourth quarter revenues, versus 24.7% in the fourth quarter of 2009.

Operating income in the fourth quarter of 2010 was $8.2 million, an increase of 149.2% compared to the same period last year. The operating margin was 60.1% in the fourth quarter of 2010, compared to 72.4% in the year-ago quarter. The year-over-year increase in operating income was due to revenue growth, while the reduction in margin was the result of lower gross margins resulting from a sales mix that included equipment sales, which command lower margins than the Company’s software and system integration businesses.

The Company recorded an income tax benefit of $2,276 in the fourth quarter of 2010, representing a reversal of income tax expense recorded in the third quarter of 2010.  The Company recorded no income tax expense in 2010, as its operating companies were exempt from PRC income tax.  In 2011, Trunkbow’s operating companies will be subject to PRC income tax, although at preferential income tax rates.

Net income was $8.2 million in the fourth quarter of 2010, an increase of 154.1% from the comparable period in 2009. Net margin was 60.0% in the fourth quarter of 2010, compared to 70.9% in the fourth quarter of 2009. Earnings per basic and diluted share in the quarter were $0.25, versus $0.16 in the year-ago quarter.  The share count increased 66.0% versus the year-ago quarter.

2010 Full-Year Results

Net revenue increased 81.6% to $24.4 million in 2010, up from $13.4 million in 2009. Mobile Payment Solutions represented 49% of net revenue for 2010, versus 25% in 2009. Gross profit increased 73.6% to $19.5 million in 2010 from $11.2 million in 2009. The gross margin was 79.8% for 2010, versus 83.5% in 2009 as a result of lower-margin sales of point-of-sale systems. Operating expenses, including selling, general and administrative expenses and R&D increased 99.9% to $5.69 million in 2010. The increase in operating expenses was related to the expansion of the administrative and R&D departments to support growth, as well as the addition of expenses from being a publicly listed company. Interest expense was $0.2 million in, 2010 versus $0.1 million in 2009. Net income was $13.5 million up 63.3% from 2009. Earnings per basic and fully diluted share were $0.44 in 2010 and $0.42 in 2009. The weighted average number of diluted shares increased 58.6% in 2010 versus 2009.

Financial Condition

As of December 31, 2010, the Company had $10.3 million in cash and cash equivalents. Accounts receivable were $25.7 million, versus $10.5 million at the end of 2009.  The increase in receivables was attributable to the rapid increase in revenues combined with the surge in revenues in Q4.  Working capital was $43.8 million at the end of 2010, versus $9.7 million at the end of 2009. Short-term loans were at $1.8 million at the end of 2010.  Shareholders’ equity was $44.5 million, up from $9.8 million at the end of 2009.  Cash from operations was an outflow of $8.6 million, primarily due to the increase in receivables and advances to suppliers for third party software and hardware to be used in the Company’s MVAS and MPS platform deployment in 2011. Cash from investing was an outflow of approximately $1 million, and cash from financing was an inflow of $16.3 million.

Business Outlook

“After a very successful year where we achieved record revenue and net income and made solid progress executing our strategy, we expect our strong performance to continue in 2011,” continued Mr. Li. “In the year ahead, we will leverage our strong R&D capabilities to enhance our product pipeline and develop the next generation of MPS applications. More importantly, we will build on our strong relationships with China’s big three telecom carriers and our resellers to increase market share and expand our MPS platforms into 10 provinces with China Unicom and roll out the new MVAS platforms into 10 new provinces with China Unicom.”

Historically, we have generally experienced a slowdown in revenues in the first quarter due to the Chinese Lunar New Year, since the majority of businesses are shut down for a month-long holiday, though we expect this seasonality to subside as we receive more revenue from recurring streams.

“In 2011, we expect to grow revenues and net income 30%,” continued Mr. Li.

Recent Events

On February 8, 2011 the Company completed an initial public offering of 4,000,000 shares of Common Stock that were priced at $5.00 per share, generating net proceeds of $18.1 million. Following the offering, the Company had 36,507,075 shares issued and outstanding as of March 29, 2011.

Conference Call

The Company will host a conference call to discuss financial results for the fourth quarter and fiscal year 2010 on March 31, 2011 at 8:00 am ET. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 866 788 0546. International callers should dial +1 857 350 1684. The pass code required is 81340376.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on March 31, 2011. To access the replay, please dial +1 888 286 8010, international callers dial +1 617 801 6888, and enter the pass code 76634048.

About Trunkbow

Trunkbow International Holdings (NASDAQ: TBOW), is a leading provider of Mobile Payment Solutions (“MPS”) and Mobile Value Added Solutions (“MVAS”) in PRC. Trunkbow’s solutions enable the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn. Since its inception in 2001, Trunkbow has established a proven track record of innovation, and has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For additional information please visit http://www.trunkbow.com

Safe Harbor Statement

This press release contains forward-looking statements that reflect the Company’s current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company’s relationship with China’s major telecom carriers and its resellers, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs.  You should understand that the Company’s actual future results may be materially different from and worse than what the Company expects. Information regarding these risks, uncertainties and other factors is included in the Company’s annual report on Form 10-K and other filings with the SEC.

– FINANCIAL TABLES FOLLOW –

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended December 31, Year Ended December 31,
2010 2009 2010 2009
Revenues $ 13,944,715 $ 4,560,235 $ 24,843,836 $ 13,468,581
Less: Business tax and surcharges 285,480 11,521 455,919 38,624
Net revenues 13,659,235 4,548,714 24,387,916 13,429,957
Cost of revenues 3,603,620 134,551 4,929,974 2,220,577
Gross margin 10,055,615 4,414,163 19,457,942 11,209,380
Operating expenses
Selling and distribution expenses 543,335 127,858 1,412,499 533,633
General and administrative expenses 837,392 859,624 3,075,833 1,877,732
Research and development expenses 470,673 134,501 1,203,264 435,712
1,851,400 1,121,983 5,691,596 2,847,076
Income from operations 8,204,215 3,292,180 13,766,347 8,362,303
Other (income) expenses
Interest income (19,998) (80) (37,204) (350)
Interest expense 30,741 66,016 220,668 66,016
Other expenses 3,515 2,271 41,998 3,655
14,258 68,207 225,462 69,321
Income before income tax expense 8,189,957 3,223,973 13,540,885 8,292,982
Income tax expense (2,276) — — —
Net income 8,192,233 3,223,973 13,540,885 8,292,982
Foreign currency translation fluctuation 751,422 67,494 1,170,811 (92,830)
Comprehensive income $ 8,943,655 $ 3,291,467 $ 14,711,696 $ 8,200,152
Weighted average number of common shares outstanding
Basic and diluted 32,472,075 19,562,888 31,022,002 19,562,888
Earnings per share
Basic and diluted $ 0.25 $ 0.16 $ 0.44 $ 0.42
TRUNKBOW INTERNATIONAL HOLDINGS LIMITED 

CONSOLIDATED BALANCE SHEETS
December 31,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 10,259,750 $ 3,305,473
Restricted deposit 362,987 —
Accounts receivable 25,658,184 10,455,284
Advances to suppliers 6,881,368 7,580
Loans receivable and other current assets, net 3,900,168 1,078,075
Due from directors 79,256 2,088,168
Inventories 3,681,450 307,182
Total current assets 50,823,163 17,241,762
Property and equipment, net 484,761 39,817
Long-term prepayment 358,397 —
TOTAL ASSETS $ 51,666,321 $ 17,281,579
LIABILITIES AND STOCKHOLDERS‘ EQUITY
Current liabilities
Accounts payable $ 853,762 $ 331,654
Accrued expenses and other current liabilities 593,846 603,266
Short-term loan 1,814,937 —
Due to directors — 24,430
Contingently convertible notes — 5,000,000
Taxes payable 3,718,963 1,561,599
Total current liabilities 6,981,508 7,520,949
Other non-current liabilities 138,767 —
Total liabilities 7,120,275 7,520,949
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS‘ EQUITY
Preferred Stock: par value USD0.001, authorized 10,000,000 shares, issued
and 0 outstanding at December 31, 2010 and  2009		 — —
Common Stock: par value USD0.001, authorized 190,000,000 shares, issued
and outstanding 32,472,075 shares at December 31, 2010 and 19,562,888 at
December 31, 2009		 32,472 19,563
Additional paid-in capital 21,384,050 1,323,239
Appropriated retained earnings 2,428,847 1,010,486
Unappropriated retained earnings 20,125,001 8,002,477
Accumulated other comprehensive income/(loss) 575,676 (595,135)
Total stockholders‘ equity 44,546,046 9,760,630
TOTAL LIABILITIES AND STOCKHOLDERS‘ EQUITY $ 51,666,321 $ 17,281,579
TRUNKBOW INTERNATIONAL HOLDINGS LIMITED 

CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2010 2009
Cash flows from operating activities
Net income $ 13,540,885 $ 8,292,982
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 93,135 20,362
Loss on disposal of property and equipment — 1,281
Provision for doubtful debts 366,912
Changes in operating assets and liabilities:
Accounts receivable (14,480,828) (9,791,845)
Advance to suppliers and other assets (6,369,759) 95,224
Inventories (3,280,951) (307,017)
Long-term prepayment (784,576) (241,583)
Accounts payable 498,222 (85,218)
Accrued expenses and other current liabilities 118,273 383,859
Amount due to directors (24,641) 24,417
Taxes payable 2,052,307 (64,827)
Net cash flows used in operating activities (8,637,933) (1,305,453)
Cash flows from investing activities
Acquisition of property and equipment (449,169) (4,729)
Loans to third parties (2,579,165) 57,070
Collection in (increase in) amount due from directors 2,028,869 (877,876)
Collection in long-term receivables — —
Net cash flows (used in) investing activities (999,465) (825,535)
Cash flows from financing activities
Increase in restricted deposit (362,987) —
Proceeds from issuance of common stock (net of finance costs) 17,073,720 100,000
Repayment of loans from third parties (147,520) (53,618)
Repayment of contingently convertible notes (2,000,000) —
Proceeds from issuance of contingently convertible notes — 5,000,000
Proceeds from short-term loan 1,770,238 —
Net cash flows provided by financing activities 16,333,451 5,046,382
Effect of exchange rate fluctuation on cash and cash equivalents 258,224 (100,880)
Net increase in cash and cash equivalents 6,954,277 2,814,514
Cash and cash equivalents – beginning of the year 3,305,473 490,959
Cash and cash equivalents – end of the year 10,259,750 3,305,473
Supplemental disclosure of cash flow information
Cash paid for interest $ 220,668 $ —
Cash paid for income taxes $ — $ —
Supplemental disclosure of noncash financing activities
Conversion of contingently convertible notes to common stock $ 3,000,000 $ —

Source: PR Newswire

The Mobile Internet Market in China: Outlook for 2011

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CCID Consulting has released highlights from its new research report summarizing China’s mobile internet market in 2010, and outlook for 2011, where the  company predicts strong growth in the development in the platform businesses along with intensifying competition for users in 2011:

It has been ten years since the start of the mobile internet as a WAP application in 2000. With the extensive construction of 3G networks, the gradual spread of 3G applications and the advancement of Internet Web2.0 in China last year, the mobile internet has began to reveal its huge potential.

2010: Rapid growth in the number of users & an emerging industry landscape.

Mobile internet saw rapid growth in 2010, with the number of users and revenue increasing constantly. According to the 26th Statistical Report on the State of China’s Internet released by CNNIC, as of June 2010, the number of users using cell phone for internet access amounted to 277 million, or about 40% of all cell phone users; among them 43.34 million were newly added in 2010, representing a growth of 18.6% from the end of 2009. The mobile internet revenue continued its fast growth on the basis of RMB 11.2 billion in 2009, and CCID Consulting expects the revenue of 2010 will exceed RMB 15 billion.

As for the terminals and platforms as carriers for mobile internet, hardware terminals led by cell phones also maintained their growth momentum, with annual shipment of mobile phones exceeding 700 million units in 2010, accounting for 60% of the global production. Smart phones and functional mobile phones also gained traction; smart phones saw an increase in its market share, while functional phones were still popular thanks to their low prices and ease of use. Currently, the mainstream mobile platforms include MTK-based Java, Symbian, Windows Mobile, Linux, Android, OMS, IOS and Brew, with the Java platform grabbing the largest share due to the huge number of functional phones, followed by Symbian, thanks to Nokia’s market share and Brew due to its monopoly of Qualcomm in the CDMA market.

The huge number of users helped accelerate the market maturation and business growth, characterized by an increased level of commercialization, continued advantages in entertainment features, and growing value as a tool of communication and information.

Mobile e-commerce represented by mobile payment saw a significant growth in 2010:

  • China UnionPay, in alliance with eighteen commercial banks, as well as China Unicom, China Telecom and mobile phone manufacturers, established the Mobile Payment Industry Union;
  • YeePay, a domestic third-party payment giant, acquired WestPay in Chengdu, ushering in the age of industry reshuffling;
  • Mobile entertainment represented by music, e-reading and games also continued its fast growth. In 2010, China Mobile’s music base in Sichuan contributed revenue of over RMB 10 billion;
  • following Hanwang, SDO leveraged its advantages in online literature to launch its own e.p.book.

Communications and information tools such as instant messaging (IM), mobile community and location services are gaining traction, with the number of active mobile IM users reaching 162 million and the number of mobile browser users exceeding 100 million.

Meanwhile, the business model of application stores is gaining popularity. MM (Mobile Market) launched by China Mobile last year now boasts 80,000 registered developers and 11 million registered users. It has sold a total of approximately 30,000 applications and has seen over 40 million downloads. Platform and mobile phone vendors such as SIKAI and Nokia have set up their own application stores. Diversity of businesses and services content has become a major feature of mobile internet development.

Despite the robust growth of mobile internet in 2010, problems still abound. Services and applications are mainly run on 2G networks while the 3G network are under utilized due to cost and bandwidth limitations; many applications are limited to functional phone plus WAP access uses due to the high prices of smart terminals; a significant proportion of the users are of lower age, poor education background, and low income; the mobile internet vendors have a relatively poor profitability and lack a sound profit model.

2011: Improvement of platform businesses & focus on competition for users

In 2011, the 2G plus WAP-based mobile internet model will become outdated while 3G and www application-based networks will usher in a new era of mobile internet.

In terms of terminals and platforms, smart phones priced around RMB 1,000 or below will encourage users to shift from functional phones to smart phones. With its bigger screen and more fascinating way of operation, touch-screen phones are for a better match for mobile internet and will gain popularity; it is worth noticing whether the Android mobile operating system launched by Google in 2009 will outdo Symbian to become the No. 1 platform; Microsoft Windows phone 7 (Wp7) will make a comeback, and its clout is too big to be ignored; openness will become a major characteristic of the operating system platform.

As for application delivery, with improved bandwidth and cost affordability, bandwidth-sensitive services like video download, video call and real-time monitoring will gradually gain traction. While with improved payment regulations and market environment, mobile payment will become popular in 2011, where mobile phone recharge, credit card repayment, utilities payment, ticket reservations, public transport payment, movie ticket payment and shopping payment may be easily done via cell phones. Moreover, application delivery methods such as application stores and application warehouses are bound to go mainstream, and major vendors’ application stores will generate significant cash flow; the advertising business will also help ensure the lucrative prospect of mobile internet.

Another major characteristic of mobile internet in 2011 will be the intense competition for users, with user access to become the hot spot for competition among vendors. Only by controlling “the first entry” for users can vendors be successful in the cut-throat market competition, no matter whether it is in the case of terminals or applications, platforms or services, instant messaging or location services, browsers or input methods.

Source: CCID Consulting

The 2nd Mobile Payment China 2011: July 12-13, 2011, Shanghai, China

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The 2nd Mobile Payment China 2011 is dedicated to establishing a dynamic platform for knowledge sharing, networking and collaboration. Embracing the two main subjects – User Experience and Cooperation for Mutual Benefit, the conference will be delivering the in-depth insights into the spotlight in terms of how to maximize the market recognition to pave the way for further development.

Location: Shanghai

Start Date: Tuesday, July 12, 2011

End Date: Wednesday, July 13, 2011

More information: Mobile Payment China

Trunkbow International Holdings Limited

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Trunkbow International Holdings, is a provider of Mobile Payment Solutions (“MPS”) and Mobile Value Added Solutions (“MVAS”) in China.

Trunkbow’s solutions enables the telecom operators to offer their subscribers access to mobile applications,  tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn.

Since the company’s inception in 2001, Trunkbow has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China.

More information: Trunkbow International Holdings