ZST Digital Networks, Inc. Signs Agreement to Develop City-wide GPS Tracking Platform for Zhumadian

ZHENGZHOU, China, Oct. 17, 2011 /PRNewswire-Asia-FirstCall/ -- ZST Digital Networks, Inc. (NASDAQ: ZSTN) ("ZST" or the "Company"), a major developer, manufacturer and supplier of digital and optical network equipment to cable system operators and provider of GPS tracking devices and support services for transport-related enterprises in China, today announced that it has entered into an agreement with the Road Transportation Department of Zhumadian, a prefecture-level city with over seven million residents in southern Henan Province, to develop a city-wide GPS tracking platform for commercial vehicles.

Under the terms of the agreement, ZST Digital will plan, design and implement a city-wide GPS tracking platform for the city's commercial vehicles.  The platform will utilize ZST Digital's commercial GPS tracking technology and will link registered vehicles to the national and provincial transportation departments.  In addition, ZST Digital will provide ongoing maintenance and support of the platform.

Upon completion of the project, commercial fleets operating within Zhumadian will be required to register their vehicles on the GPS platform, but will have the option to choose from various GPS equipment and service providers to provide the vehicle-installed GPS units.   However, as part of the agreement with Zhumadian, ZST Digital will be designated as the "preferred vendor" for GPS products and services by the Zhumadian Road Transportation Department.

ZST Digital will be responsible for the initial platform design, employee training, hardware and installation costs, and will receive ongoing service and maintenance fees, in line with its existing contracts, from commercial enterprises that select ZST Digital as their GPS tracking and services provider.  The Company expects the platform to be complete in the first quarter of 2012.  Management estimates the total investment in the project will amount to RMB1.5 – 1.6 million (approximately US$236,000 – 252,000).(1)  The Company believes that the agreement could generate approximately RMB58 – 84 million (approximately US$9 – 13 million) in revenue in the first year upon successful completion of the platform, and it expects to begin generating revenue from this project in the first quarter of fiscal 2012.   Additionally, once the commercial vehicles are fully installed with GPS, management anticipates the Company's recurring annual revenue from Zhumadian service contracts to reach approximately RMB19 million (approximately US$3 million).

Commenting on the news, Mr. Zhong Bo, the Company's Chairman and CEO, said, "This agreement is another major step forward in the establishment of our commercial GPS offering as the market leader in Henan Province and it clearly demonstrates the widespread demand for our products and technological expertise.  There are currently over 56,000 commercial vehicles operating in Zhumadian, with an average yearly growth rate of approximately 3 – 5%.  We expect that the signing of this agreement and our designation as the preferred GPS products and services provider by the Zhumadian Road Transportation Department will further accelerate the growth of our GPS products and services division. As in previous, similar agreements, we believe that the potential to significantly expand our customer base in a largely untapped market more than justifies the initial capital investment involved in the development of the GPS platform.  

"We are pleased by the consistently robust growth of our commercial GPS offering, and we believe that this agreement further proves that significant demand exists for our products. Moving forward, we will continue to explore additional opportunities to further expand our customer base and demonstrate the benefits of our GPS tracking products and services in Henan Province."    

(1) The amount in RMB was translated into U.S. Dollars using the spot rate of US$1 = RMB6.3587 for October 12, 2011.

About ZST Digital Networks, Inc.

ZST Digital Networks, Inc. (Nasdaq: ZSTN) is a China-based company, principally engaged in (1) supplying digital and optical network equipment and providing installation services to cable system operators in China and (2) providing GPS location and tracking services to local logistics and transportation companies in China.  The Company has developed a line of IPTV devices that are used to provide bundled cable television, Internet and telephone services to residential and commercial customers.  The Company has assisted in the installation and construction of over 400 local cable networks in more than 90 municipal districts, counties, townships, and enterprises. The Company has also launched a commercial line of vehicle tracking devices utilizing our GPS tracking technologies and support services for transport-related enterprises to track, monitor and optimize their businesses.  For more information about ZST Digital Networks, Inc., please visit www.zstdigital.com/English.  

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including uncertainties inherent in management's estimates on the profitability of the project; unforeseen costs and difficulties in implementing the project that would affect the resulting profitability; our ability to maintain and increase revenues and sales of our products; our ability to develop and market new products; our strategic investments and acquisitions; compliances and changes in the laws of the People's Republic of China (the "PRC") that affect our operations; our ability to obtain all necessary government certifications and/or licenses to conduct our business; vulnerability of our business to general economic downturn, especially in the PRC; adverse capital and credit market conditions and our ability to meet liquidity needs; and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

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SOURCE ZST Digital Networks, Inc.