Qingdao Municipality requires QBB to cease analog television broadcast in two years, and during the period to commission DVN to install set top boxes in all 600,000 households in the city. QBB will pay a licensing fee to DVN for such services. The new contract is expected to contribute significantly to sales and licensing revenues of the Group in the coming year. The contract signing ceremony was held in Qingdao in the presence of Dr Sun Chaohui, Deputy Director of QBB and Mr Terry Lui, CEO of DVN.

The collaboration follows recent government calls to convert 30 million cable users to digital by 2005, with the aim of converting all 100 million cable subscribers to digital by 2015. China's State Administration for Radio, Film and Television ("SARFT") has named Qingdao as a pioneering city to chart the course of the country's migration to digital broadcasting.

Mr Terry Lui, CEO of DVN noted: "We have leveraged our early-mover advantage to the establishment of a dominant presence in Qingdao. With our collaborative efforts with QBB, we are confident that the coverage of digital TV will expand much more rapidly in the municipality. This new partnership with QBB follows our recent collaboration with Hisense, and increases our lead in digital broadcasting capabilities."

Qingdao is currently the first city in China to promote digital pay TV by cutting off the analog signal. It has also been chosen as the venue for water sports games of the 2008 Olympics, a natural event for DVN and QBB to stage their first global digital broadcast. The two companies will work closely to bring the DVN digital broadcasting expertise and experience to market.

In lieu of payment for the set top box, with which subscribers in Qingdao can increase the number of channels they receive from 28 to 50, they need only to pay an additional monthly fee of RMB 10. The scalable platform allows a maximum of 500 channels. A survey conducted by authorities indicates that 74% of urban residents are willing to pay for digital TV services. To put the potential in perspective, Qingdao alone has potential demand for more than 800,000 set top boxes.

Mr Lui went on to say that: "In addition to advancing broadcasting quality and volume, digital TV commands a unique platform to develop value-added services. Subscribers in Qingdao will be able to enjoy the convenience of connecting their homes to government notices, market information, tariff payment, e-banking and e-shopping services. This emerging business opportunity is a major growth driver for DVN.

"The Qingdao agreement is the first of many set top contracts that DVN expects to receive over the next several months. Cable operators are now formulating their business plans to migrate their subscribers to digital, so 2004 is expected to be a major breakout year for the business. DVN's increasing order book reflects the positive outlook for next year."

About DVN
DVN (Holdings) Limited (SEHK: 500) is a leading media technology company specializing in the development of comprehensive digital broadcast platforms for TV operators over which pay TV services, programme contents, related value-added services and applications to end-users are delivered. DVN's technologically advanced yet cost effective digital TV platform, custom-made for PRC operators, has made it a key player in making digital broadcasts in China a reality. DVN has so far installed over 20 digital broadcasting systems in more than 10 municipalities and provinces to enable the rollout of a range of channel rebroadcasts, near video on demand, online information, interactive advertising and TV-commerce services. A nationwide survey report conducted by the Academy of Broadcasting Science, SARFT of China in 2002 ranked DVN's branded set top boxes the highest in adoption rate amongst TV operators in the country. Based in Hong Kong and listed on the Stock Exchange of Hong Kong in 1989, DVN has been operating in the technology sector since 1982.