China Telecom taps FLAG Telecom to provide capacity between China and the U.S.

August 25, 2004 London and Hong Kong -- Leading Chinese operator China Telecom has awarded FLAG Telecom, provider of international wholesale network transport and communications services, a multi-million dollar contract for multiple STM-16s, providing a 30-Gbit/sec capacity link between China and the United States. It is the largest capacity purchase ever by China Telecom.

August 25, 2004 London and Hong Kong -- Leading Chinese operator China Telecom has awarded FLAG Telecom, provider of international wholesale network transport and communications services, a multi-million dollar contract for multiple STM-16s, providing a substantial 30-Gbit/sec capacity link between China and the United States. The STM-16s will provide full-circuit connectivity to carry large volumes of voice, data, and Internet traffic between China and the US West Coast. To meet China Telecom's requirements, FLAG Telecom is providing an integrated solution based on its FLAG North Asia Loop (FNAL) system and Tyco Telecommunications' TGN Trans-Pacific cable.

This contract is expected to satisfy mid- to long-term forecast demand and positions FLAG Telecom as a major supplier to China Telecom. The demand for connectivity is being driven primarily by the continuing rapid growth of IP traffic and bandwidth-hungry Internet applications. The number of Internet subscribers reached 11 million by the end of June 2004, a 50% increase in the number of subscribers at the end of 2003. The user base is expected to expand 100% in 2004 and grow at an average of 50% annually in the next three years.

"At present, the driving forces for growth are Internet and Broadband," explains Chang Xiao Bing, chief operating officer of China Telecom. "This agreement with FLAG enables us to meet the burgeoning demands of our customers and ensures we meet the anticipated growth in new broadband services. China Telecom selected the bid by FLAG as it offered an extremely high quality, scaleable solution at a cost-effective price. Our connectivity will be carried entirely on the latest generation of Tbit/sec loop cable systems, providing additional resilience."

"Broadband subscribers in China grew by more than 14% to 2.85 million in the first quarter of this year," adds Owen Best, president, Asia Pacific, FLAG Telecom. "However, although China today has the largest number of broadband users in Asia, we have yet to see the market penetration rates achieved in Korea and Japan. Over the next couple of years, as the broadband demand starts to bite with the continued roll-out of Fiber to the Home (FTTH), we anticipate an enormous impact on the market."

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