KongZhong to Partially Prepay Convertible Senior Note to Nokia Growth Partners

BEIJING, Feb. 23, 2011 /PRNewswire-Asia/ -- KongZhong Corporation (Nasdaq: KONG), a leading mobile Internet company in China, today announced that it has entered into a binding agreement with Nokia Growth Partners (NGP) to partially prepay the 5-year convertible senior note issued to NGP on March 18, 2009. Under the terms of the agreement, KongZhong will prepay 70% of the aggregate principal amount of the 5-year convertible senior note for US$ 9.31 million in cash, plus any accrued but unpaid interest on the note.

The prepaid portion of the note has rights to be converted into 1.33 million American Depositary Shares (ADS) equivalent to 53.2 million ordinary shares, representing about 3.5% of KongZhong's total shares outstanding as of December 31, 2010. The Company expects the transaction to be closed in the first quarter of 2011, and the prepayment amount will be paid in cash from cash on hand.

After closing, NGP would be issued a replacement note representing 30% of the aggregate principal amount of the original 5-year convertible senior note, with the same terms and conditions, and will continue to hold the warrant to purchase an additional 2.0 million ADSs at US$5.00 per ADS.

"The Company believes the reduction of debt and potential future share issuance is a prudent use of existing cash resources as the WVAS market stabilizes and the Company has diversified into Internet games. NGP remains an important and significant investor in KONG," said Jay Chang, CFO of KongZhong.

The proposed transaction is subject to customary closing conditions. The board of directors of KongZhong has approved the transaction.

About KongZhong:

We are one of the leading providers of digital entertainment services for consumers in the PRC. We operate four main business units, namely WVAS, WIS, mobile games and online games. We are one of the leading providers of WVAS to mobile phone users. We began providing WVAS on the networks of China Mobile in 2002. Since 2004, we have provided WVAS on the networks of China Unicom, China Telecom, China Netcom and the other major telecommunications operators in the PRC. Since 2004, we have been offering news, entertainment, community and mobile advertising services through our wireless Internet sites, including Kong.net, ko.cn and ct.cn. In 2008, we began reporting our mobile games business as a stand-alone operating segment, while it was previously reported as part of our WVAS business. We began our online games business in 2010, through our acquisition of Dacheng Networks, a developer and operator of online games.

Safe Harbor Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding trends in the wireless value-added services, wireless media, mobile games and online games industries and our future results of operations, financial condition and business prospects. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continued competitive pressure in China's wireless value-added services, wireless media, mobile games and online games industries and the effect of such pressure on revenues; our ability to develop new products that are commercially successful; unpredictable changes in technology, consumer demand and usage preferences in the markets we operate; our ability to protect our intellectual property rights; the short operating history of certain of our business segments, in particular the online games segment; the state of and any change in our relationship with China's telecommunications operators; our dependence on the billing systems of telecommunications operators for our performance; the outcome of our investment of operating income generated from the WVAS segment into the development of our wireless Internet, mobile games and online games segments; changes in the regulations or policies of the Ministry of Industry and Information Technology and other government authorities relevant to our businesses; and changes in political, economic, legal and social conditions in China, including the Chinese government's policies with respect to economic growth, foreign exchange, foreign investment and entry by foreign companies into China's telecommunications and online games markets. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

SOURCE KongZhong Corporation