EX-99.3 4 b60129wcexv99w3.htm EX-99.3 ANNUAL BUSSINESS REPORT exv99w3
 

Exhibit 99.3
(WIDERTHAN LOGO)
Annual
Business Report
Period 6
January 01, 2005 ~ December 31, 2005
WiderThan Co., Ltd.

 

 

(WIDERTHAN LOGO)
Table of contents
1. Company overview
2. Changes in capital stock and liability
3. Business description
4. Financial statement
5. Board of Directors and Audit Committee members
6. Shareholder information
7. Investment in equity securities
8. Subsequent events

 

 

(WIDERTHAN LOGO)
1. Company overview
1.1. Company mission
Our mission is to ensure a mobile Internet future – opening a “wider” world to our customers’ subscribers. WiderThan was established in June, 2000 with a vision of pioneering the global mobile Internet. Our main objective is to create and deliver groundbreaking mobile Internet products, solutions and services. Our applications, content and services enable wireless carriers to provide a broad range of mobile entertainment, such as ringback tones, music-on-demand, mobile games, ringtones, messaging and information services, to their subscribers.
From our roots developing and operating mobile entertainment applications for SK Telecom in Korea we have grown into a world leader in the fast-evolving mobile Internet industry. We have successfully developed several applications that we believe were among the first to be deployed anywhere in the world. For example, in 2002, we launched with SK Telecom a WAP, and web enabled ringback tone service, which enables callers to hear music chosen by the service subscriber instead of the traditional electronic ringing sound, while waiting for the call recipient to answer. In 2004, we deployed in Korea a music-on-demand service that enables subscribers to download music to MP3-enabled mobile phones over both wireline or wireless networks.
We currently provide mobile entertainment solutions to 42 wireless carriers in 17 countries, including SK Telecom in Korea, Cingular Wireless, Sprint PCS, T-Mobile USA and Verizon Wireless in the United States, Bharti Airtel in India and Globe Telecom in the Philippines.
The key to WiderThan’s rapid growth and success is its innovative and industry-experienced team comprised of executives from SK Telecom, Nokia, Qualcomm, Samsung Electronics, VeriSign, EDS, AT Kearney and others. WiderThan has been aggressive and exclusive in bringing together only the best management and industry technologists in their respective fields. Together they’re committed to WiderThan’s mission of ensuring a mobile Internet future – opening a “wider” world to its users.

 

 

(WIDERTHAN LOGO)
1.2. Company history
June, 2000
WiderThan.com established

November, 2001
WiderThan.com becomes the first Korean company to export wireless internet platform on a turn key basis to GSM operator

April, 2002
WiderThan.com offers world’s first mobile broadcasting service through NateAir of SK Telecom

April, 2002
Ringback tone IVR service by WiderThan.com ‘5082 COLORing’ is introduced to SK Telecom

May, 2002
WiderThan secures strategic investment from Nokia Venture Partners

November, 2002
WiderThan.com opens Beijing office.

June, 2003
WiderThan.com in cooperation with SK Telecom provides COLORing solution to MobileOne of Singapore

July, 2003
WiderThan.com introduces Zamburger, a “takeout entertainment’ brand for total mobile internet contents and services through WAP and WEB

July, 2003
WiderThan.com provides COLORing solution to Vietnamese carrier

January, 2004
WiderThan.com provides WAP cartoon contents to China mobile

March, 2004
WiderThan.com signs agreement with Globe telecom of the Philippines to provide industry leading ringback tone solution and service operation

March, 2004
WiderThan.com opens Philippine office.

July, 2004
WiderThan.com opens New Delhi office.

July, 2004
WiderThan.com makes inroads into the Indian market by providing industry leading ringback tone solution and service to Bharti Airtel

 

(WIDERTHAN LOGO)
October, 2004
WiderThan.com expands its presence in the United States with acquisition of Ztango

November, 2004
WiderThan.com provides ringback tone solution and service to Verizon wireless

December, 2004
WiderThan.com provides ringback tone solution and service to T-Mobile in the United States

January, 2005
WiderThan.com changes its corporate name to “WiderThan”, reinforcing our mission to deliver groundbreaking mobile Internet solution and services and to open a wider world to mobile users everywhere

June, 2005
WiderThan provides ringback tone solution and service to Indonesia’s major mobile operator, PT Excelcomindo Pramata

December, 2005
WiderThan makes the stock market debut at NASDAQ

January, 2006
WiderThan provides V CAST Music On Demand solution and service to Verizon wireless
1.3. Employees
                                   
  2002   2003   2004   2005  
    208       257       378       437    
 
*   including HQ and all global subsidiaries and branch offices

 

 

(WIDERTHAN LOGO)
1.4. Global subsidiaries and branch offices
             
        Major business    
        contents   Location
Branch office
  Philippines   Ringback tone, Games   Units 1206-1208, Ayala Tower One and Exchange Plaza, Ayala
 
          Triangle, Ayala Avenue, Makati City, Metro Manila, Philippines
 
            
 
  China   Games   No. 406, C1 Building Huitong Office Park, No 71, Jianguo
 
          Road, Chao Yang District, Beijing 100025, China
 
            
Subsidiaries
  United States   Ringback tone,   Virginia office
 
      Music On Demand,
Games, Inter 		  11600 sunrise Valley Drive, Suite 100 VA 20191
 
      Carrier Messaging   Seattle office
 
          13555 SE 36th. Suite# 101, Bellevue, WA 98006
 
            
 
          New York office
 
          519 8th. 2nd Floor, New York, NY 10018
 
            
 
  India   Ringback tone,
IPG, Games 		  H-12 Ground floor, Greenpark Extension, New Delhi 110-016, India
 
            
 
  Indonesia   Ringback tone, Games   Menara Rajawali 6th Fl., Kawasan Mega Kuningan Lot #5.1,
 
          Jakarta Selatan 12950, Indonesia
 
            
 
  United Kingdom   Ringback tone   200 Brook Drive, Green Park, Reading, RG2 6UB, United Kingdom

 

 

(WIDERTHAN LOGO)
2. Changes in capital stock and liability
2.1. Changes in capital stock
(Unit: in million Korean won)
                                                 
            Number of                            
            shares     Par             Cumulative        
            issued     value     Paid-in     Paid-in        
Date   Category     (Shares)     (Won)     Capital     Capital     Remarks  
June, 2000
   Common stock     120,000       5,000       600       600     Incorporation
August, 2000
   Common stock     280,000       5,000       1,400       2,000          
November, 2000
   Common stock     400,000       5,000       2,000       4,000          
March, 2001
   Common stock     200,000       5,000       1,000       5,000          
May, 2002
   Preferred stock     142,857       5,000       714       5,714          
June, 2004
   Common stock     500,000       500       250       5,964          
October, 2004
   Preferred stock     2,052,479       500       1,026       6,991          
August, 2005
   Preferred stock     926,167       500       463       7,454          
December, 2005
   Common stock     4,000,000       500       2,000       9,454          
December, 2005
   Common stock     900,000       500       450       9,904          
*   Stock split.
 
    On August 2003, the number of our issued and outstanding shares (including preferred shares) was increased as a result of a 10-for-1 stock split.
 
*   Conversion of preferred stock to common stock
 
    All of Series A, B and C Preferred stock(total 4,407,216 stocks) have been converted into common stock with a conversion ratio of 1:1 at the time of initial public offering in NASDAQ.

 

(WIDERTHAN LOGO)
2.2. Changes in liability
We do not have any debt as of December 31, 2004 and 2005.
3. Business description
WiderThan delivers mobile Internet solution and services
3.1. Service business
Our service business consists of the followings:
3.1.2. CAS (Carrier Application Service)
Through carrier application services, we design and develop mobile entertainment applications that we then manage and operate for and on behalf of our carrier customers. We have developed several carrier application services for the global market, including ringback tone service, which enables callers to hear music while waiting for the call recipient to answer, and music-on-demand, which enables subscribers to download music to MP3-enabled mobile phones.
For our services, we receive from our carrier customers any combination of (i) a percentage of the carrier’s monthly subscription and/or transaction revenue, (ii) a fixed fee per transaction or (iii) a fixed fee per period. Under revenue share agreements, we share in the revenues generated by our carrier customers by receiving a percentage of the revenues generated by the carriers through our carrier application services. Our carrier customers may charge their subscribers either a monthly subscription fee or a per transaction fee or both depending on their revenue and billing models. Under fixed fee per transaction arrangements, we receive from our carrier customers a fixed fee per every transaction made by the users of such carrier customers. Under fixed fee per period arrangements, we generally receive monthly fixed fees from our carrier customers for our services.
3.1.2. Content services
Our content services involve the delivery of content, such as ringback tones, ringtones and mobile games, to wireless subscribers through application service providers such as ourselves or through a carrier’s own applications.
3.1.3. Professional and other services
Our professional services include website creation and management, software development, consulting and other services. Our website creation and management service includes designing and maintaining loyalty program websites for four different membership clubs offered by SK Telecom. Our responsibilities include online strategy and

 

 

(WIDERTHAN LOGO)
planning, website and WAP site integration, market research, promotion, content planning, interface designs, site maintenance, customer service and content provider support. For this service, we receive from SK Telecom a monthly site management fee, plus additional fixed fees for content design, promotion, site renewal and additional planning.
3.2. System sales
Our system sales principally involve the sale to wireless carriers of hardware with our software application loaded onto it, together with system integration and maintenance fees.

 

 

(WIDERTHAN LOGO)
4. Financial statement
Our revenue in 2005 is 78,467 million won which is 14.1% increased as compared to the previous year 68,777 million won. However, net income of 4,052 million won and earning per share of 278 won in 2005 are decreased as compared to the net income 6,402 million won and earning per share of 466 won in 2004. Stock compensation expense has increased from 186 million won to 4,133 million won, by 3,947 million won.
After the initial public offering to NASDAQ, cash and cash equivalent increased to 69,766 million won, which is an increase by 51,836 million won as compared to previous year.
< Balance Sheet>
As of December 31, 2005
(Unit: in thousands of Korean won)
         
    Amount  
Current assets
     117,765,159  
Non current asset
     37,622,619  
Total assets
     155,387,778  
 
      
Current liabilities
     35,968,283  
Non current liabilities
     1,804,882  
Total liabilities
     37,773,165  
 
      
Common stock
     9,903,608  
Additional paid-in capital
     84,470,820  
Retained earnings
     19,691,327  
Capital adjustments
     3,548,858  
Total shareholders’ equity
     117,614,613  
 
      
Total liabilities and shareholders’ equity
     155,387,778  
 
      
< Statements of Income>
From January 1, 2005 to December 31, 2005
(Unit: in thousands of Korean won)
         
    Amount  
Operating revenue
     78,467,090  
Operating expenses
     70,774,050  
 
      
Outsourcing cost
     28,829,875  
Salaries
     16,758,138  
Advertisement
     4,080,147  
Other operating expense
     21,105,890  
Operating income
     7,693,040  
 
      
Non-operating income
     1,545,674  
Non-operating expenses
     2,010,918  
Income before Taxes
     7,227,796  
 
      
Income taxes
     3,175,360  
Net income
     4,052,436  
 
      

 

(WIDERTHAN LOGO)
5. Board of Directors and Audit Committee members
             
Title   Name   Position   Remarks
CEO
  Sang-Jun Park   Representative Director    
Director
  Randolph Lee Austin, Jr.   Non-executive director    
Director
  Thomas E. Wheeler   Non-executive director    
Director
  Jin-Woo So   Non-executive director    
Director
  Dong-Hyun Jang   Non-executive director    
Director
  Jung-Woo Sung   Non-executive director   Audit Committee member
Director
  Lori Holland   Non-executive director   Audit Committee member
Director
  Antti Kokkinen   Non-executive director   Audit Committee member
Director
  Neeraj Bharadwaj   Non-executive director    
6. Shareholder information
6.1. Description of common stock
(Unit : Shares, in thousands of Korean won)
                         
    Number of     Paid-in        
Category   shares     capital     Remarks  
Common stock
     19,807,216       9,903,608          
6.2. Major shareholders
                         
    Number of     Percentage of        
Name of shareholder   Shares     ownership (%)     Remarks  
SK Telecom
     2,000,000       10.10 %   Affiliate
Nokia Venture Partners II, L.P. (note 1)
     2,011,735       10.16 %        
SAIF Capital Limited
     1,600,000       8.08 %        

 

 

(WIDERTHAN LOGO)
                         
    Number of     Percentage of        
Name of shareholder   Shares     ownership (%)     Remarks  
i-Hatch Ventures, L.P. (note 2)
     1,521,834       7.68 %        
WTC Investment BVBA
     1,000,000       5.05 %        
Tae-Won Chey
     828,362       4.18 %        
General Atlantic Partners 64 L.P. (note 3)
     494,790       2.50 %        
Jin-Woo So
     334,000       1.69 %   Director
Sang-Jun Park
     150,000       0.75 %   Representative director
Listed on NASDAQ ADS
     6,900,000       34.84 %        
Others
     2,966,495       14.98 %        
Total
     19,807,216       100.00 %        
(Note 1)   Consist of 1,989,815 shares held by Nokia Venture partners II, L.P. and 21,920 shares owned by NVP Affiliates Funds II, L.P.
(Note 2)   Consist of 518,069 shares owned by i-Hatch Ventures L.P., 3,765 shares owned by i-Hatch Advisor L.P. and 1,000,000 shares owned by i-Hatch WTC Holdings LLC.
(Note 3)   Consist of 420,859 shares owned by General Atlantic Partners 64, L.P. and 73,931 shares owned by GAP Coinvestment Partners II, L.P. 73,931 stocks.
6.3. Transaction with major investors
In 2005, about 87% of our revenue, 68,240 million won, came from SK Telecom.

 

 

(WIDERTHAN LOGO)
7. Investment in equity securities
7.1 Available-for-sale securities
(Unit: in thousands of Korean won)
                         
    Percentage of     Acquisition     Carrying  
Company name   ownership (%)     cost     value  
InnoAce Co., Ltd.
     7.50 %     240,000       240,000  
JC Entertainment Inc.
     1.47 %     266,000       93,545  
Total
             506,000       333,545  
7.2 Equity-method investment securities
(Unit: in thousands of Korean won)
                         
    Percentage of     Acquisition     Carrying  
Company name   ownership (%)     cost     value  
AirCross Co., Ltd.
     42.86 %     337,500       785,719  
Widerthan Americas
     100.00 %     25,755,146       22,348,378  
Widerthan Indonesia
     100.00 %     202,740       249,020  
Widerthan UK
     100.00 %     361,036       550,951  
Total
             26,656,422       23,934,068  
8. Subsequent events
No material events are noted