VisionChina Media Inc. Announces Restructuring of Shanghai Subway Contract Restructuring expected to lower the Company's fixed media costs and improve operating margin
BEIJING, Oct. 24, 2012 /PRNewswire/ -- VisionChina Media, Inc. ("VisionChina" or the "Company") (Nasdaq: VISN), one of China's largest out-of-home digital television advertising networks on mass transportation systems, today announced its consolidated affiliated company, Beijing Eastlong Advertising Co., Ltd. ("Eastlong Advertising"), has reached a consensus with Shanghai Metro Television Company Limited ("Shanghai Metro TV") regarding the termination of an exclusive agency agreement, which had a contract period of five years from January 1, 2009 to December 31, 2013 and granted the Company the exclusive right to operate its digital mobile television advertising network on all the existing subway lines in Shanghai. The exclusive agency agreement was acquired by way of the Company's acquisition of Digital Media Group Company Limited, ("Digital Media Group"). This acquisition was closed on November 16, 2009 and took effect from January 2010. The termination of this exclusive agency agreement went into effect on September 1, 2012, without any form of penalty or compensation.After a series of negotiations, Eastlong Advertising recently entered into a new contract with Shanghai Metro TV to continue to operate its digital mobile television advertising network on all the existing subway lines in Shanghai for a period up to December 31, 2012 on a non-exclusive agency basis by purchasing advertising time slots with fixed per minute rates.
Mr. Limin Li, chairman and chief executive officer of VisionChina Media commented, "The restructure of our cooperation model with Shanghai Metro TV is an important step in our overarching plan to optimize media resources and control costs associated with our media platforms. The new contract, under which we pay media costs based on the advertising minutes purchased, will help improve our operating margin by releasing the Company from the unreasonably high fixed media costs and resulting operating loss in Shanghai. In addition, it allows us to continue to operate our digital mobile television advertising network on the Shanghai subway."
Mr. Stanley Wang, chief financial officer of VisionChina Media added, "The original exclusive agency agreement with Shanghai Metro TV was inherited through the Company's acquisition of Digital Media Group in November 2009. As we maintained in a series of lawsuits against the former shareholders and management of Digital Media Group, we believe that VisionChina Media was misled by the false, deceptive and unlawful statements provided by the former shareholders and management of Digital Media Group concerning Digital Media Group's financial condition and performance. We therefore projected an incorrect expectation of the operating results on those acquired media assets, including the most significant concession agreement of Shanghai subway media assets. As a result, the Company has been facing enormous pressure from the related media costs since its acquisition of Digital Media Group. In 2011, the Company terminated several other unfavorable exclusive agency agreements resulting in significant losses, acquired through Digital Media Group, including those covering Hong Kong Airport Express Line, Kowloon-Canton Through Train, Shanghai Intelligent Transport Information Signboards and Shenzhen Subway Line 1 in-train media assets."
"Close evaluation of our other acquired media assets together with mutually-beneficial negotiations with the Company's local operating partners will help to assure us a more favorable cost structure that can provide a solid basis for the Company's long term growth," added Mr. Wang.
About VisionChina Media Inc.
VisionChina Media Inc. (Nasdaq: VISN) operates an out-of-home advertising network on mass transportation systems, including buses and subways. As of June 30, 2012, VisionChina Media's advertising network included 136,075 digital television displays on mass transportation systems in 20 of China's economically prosperous cities, including Beijing, Shanghai, Guangzhou and Shenzhen, as secured by exclusive agency agreements or joint venture contract. VisionChina Media has the ability to deliver real-time, location-specific broadcasting, including news, stock quotes, weather and traffic reports, and other entertainment programming. For more information, please visit www.visionchina.cn.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates" and similar statements. Among other things, the quotations from management in this press release contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1 and its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
For investor and media inquiries, please contact:
Ms. Sharon Wu
VisionChina Media Inc.
Mr. Colin Wang
Investor Relations Director
VisionChina Media Inc.
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
SOURCE VisionChina Media Inc.