Chairman Shuang Dai

2006 has gone with many gains and losses. Revenue of CDMA business was slightly lower than the expectation in the beginning of the year. However, export of UMTS has achieved great success. In a word, thanks to excellent leadership of our management team and great efforts made by all the employees, specially the great expectation from all the shareholders and board directors on our business, Guangdong Nortel were successful in 2006.

As a high-tech enterprise of Guangdong Province, Guangdong Nortel has been insisting on introducing advanced technology in worldwide, keeping increasing R&D investment. With this tenet in mind, R&D Center expand rapidly from over 20 R&D personnel of Yr1995 to nearly 1200 R&D personnel in 2006, taking up 10% of global R&D personnel of Nortel. Currently the business scope of R&D center covers radio communication, 3G mobile communication, Next Generation Network (NGN), converged network and Wimax (4G) etc.

Guangdong Nortel has become the manufacturing center of Nortel in Asia Pacific. Nortel retreated from UMTS market for the sake of its own strategy forcing us to gave up the UMTS product line. However, we still can produce 20,000 GSM base stations, 16000 CDMA base stations and 10000 CDMA2000 base stations per year. We strive to improve product quality through 5S management, implement lean manufacturing, focus on high value-added core products. At the same time, we utilize localized hardware design capability to make full use of cost benefit and flexibility of local supply chain to become the most valuable part in the entire global supply chain of Nortel.

As the service center of Nortel in Asia Pacific, we have built up a team of experienced and competent engineers to provide cost-effective service with excellent quality, which has gained the trust & recognition of Nortel and absolutely can help Nortel to win the potential customer in the fiercely competitive market. While keeping focus on domestic market, our service team has been exploring overseas market in the Asia Pacific region as well as in the entire world, Hence the overseas service revenue ratio increased year by year. Enterprise Solution has become a new profit driven point. Our marketing team endeavors to grasp enterprise network market opportunities to reveal strategic value of Guangdong Nortel while increasing domestic EWP sales.

In Year 2007, market competition will remain severe and we are just like sailing upstream, advance or retreat. We need to enhance our core competence, maintain and develop the value of Guangdong Nortel. We should recognize and grasp market opportunities more thoroughly in various product line and business fields. In the principle of establishing a “Mutual Benefit and Win-Win” relationship with Nortel, we will further develop our own business and develop our own employees. Through a series of management measures including SAP, Lean Six Sigma, Lean Manufacturing, control of fixed cost and optimization of variable cost, we will continue to optimize overall cost-effectiveness of Guangdong Nortel, reduce DCR development cost and NPI development time; upgrade capability of hardware design, save cost and provide value-added service; provide a complete sales and service cooperation pattern as well as differentiated competence. All this will be our focus of work for 2007.

We are facing both severe challenges and great opportunities. Let’s join our hands together to meet these challenges, reveal the value of Guangdong Nortel as well as ourselves.