DVN's STB sales accelerated in the 1st half of 2004, with the number of STBs sold increasing 292% year-on-year. STB sales were particularly strong in Qingdao, Hangzhou and Foshan. During 1H 2004, STB sales revenue surged 173% to HK$42 million. DVN's net loss declined slightly to HK$19.8 million in 1H 2004 compared to a net loss of HK$21.2 million in 1H 2003. The increase in total revenues did not result in a larger decline in the net loss as DVN sold fewer of the higher margin headends.

For 1H 2004, STB revenues accounted for over 70% of total revenues, compared to 43% in 2003. Mr Terry Lui, DVN's Chief Executive Officer, explained: "This transition from headend sales to STB and over the long term to value added services is a natural progression as cable operators must first install the headends. Through these headend sales and through its leasing of headends in other localities, DVN is able to establish a base from which it can generate future revenues. After the headends are installed, the cable operator is able to sell STB and value added services to customers. With this transition, DVN expects accelerated revenue growth as the Company will be able to generate considerably more revenues from STB and the provision of services as compared to sales of headends."

DVN believes its new relationship with Motorola will strengthen its already leading market position in China. Motorola's strengths in hardware and DVN's strengths in software complement each other and will provide DVN new market opportunities. DVN is in the process of integrating Motorola's hardware into DVNs headend system, and believes with Motorola's equipment, it will be able to increase headend sales in the second half of the year.

With the government's continued push towards digitalization, DVN expects sales of STBs to increase. Over the next several months, Qingdao and Foshan will continue their aggressive rollouts in which they are essentially cutting off the analog service to their users. DVN expects other cities to follow, especially if banks provide the necessary financing as they have indicated. Furthermore, many cities in the western part of China have indicated that they intend to begin the migration to digital as a way to improve communications between the government and local citizens. In addition, in August, CCTV launched six new digital channels. As CCTV and other content providers launch other channels, DVN expects that demand for digital cable and DVN's services will increase.

About DVN
DVN (Holdings) Limited is a leading cable technology company that develops comprehensive digital transmission platforms for Pay TV over which content, services and applications to end-users are delivered. DVN's platform is inclusive of hardware, software and applications at both the headend and end-user levels that enable a service provider to run a digital broadcast business. As a result of DVN's technically advanced yet cost effective digital TV platform tailor-made for the cable TV market in the PRC, DVN is a key player in making digital broadcasts in China a reality. DVN has installed its digital broadcasting systems in more than 20 municipalities and provinces in the PRC with over 9 locations commercially operable. A range of digital TV services are provided at affordable costs which include channel rebroadcasts, near video on demand, on-line information, interactive advertising, T-commerce etc. In 2004, DVN's set top box won awards within China for its quality and popularity. Based in Hong Kong and listed on the Hong Kong Stock Exchange in 1989, DVN has been operating in the technology sector since 1982.