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Linktone Ltd. (LTON)

Q2 2009 Earnings Call

August 25, 2009 9:00 pm ET

Executives

Serena Shi - Manager of Investor Relations

Hary Tanoesoedibjo - CEO

Colin Sung - Deputy Chief Executive Officer and CFO

Analysts

Stephen Monticelli - Mosaic Investments

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Linktone Second Quarter 2009 Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions)

At this time, I would like to turn the conference over to Serena Shi of Investor Relations.

Serena Shi

Welcome to Linktone's second quarter 2009 conference call. With me here today; our Chief Executive Officer, Hary Tanoesoedibjo; and Deputy Chief Executive Officer, and the Financial Officer, Colin Sung. I am Serena Shi, the Manager of Investor Relations.

Earlier today, we announced our financial results for the second quarter ended June 30, 2009. Hary will begin today's call with a review of this quarter and a discussion of Linktone's strategy. Colin will review our income statement and the balance sheet for the second quarter. After that, we'll open the call for questions.

Before we begin, I would like to remind you that during the call, we will make forward-looking statements, which are subject to risks and uncertainties. We do not undertake any obligation to update this forward-looking information, except as required under applicable laws.

Now, I'd like hand the call to Hary Tanoesoedibjo, Linktone's Chief Executive Officer, for the summary of Linktone's business and operational results for the second quarter 2009.

Hary Tanoesoedibjo

We are pleased to report our third consecutive quarter of profitability despite the challenging environment. We remain petulant about controlling cost while working diligently to execute our growth strategy and strengthen our operational and financial performance. Specifically, we focus on utilizing distribution channels and developing new partnerships to deliver superior and unique content offerings.

Meanwhile, we are continuing to actively monitor the competitive landscape for strategic acquisitions and alliance opportunities. Our overseas development efforts are progressing positively. Given the large population size and the high mobile penetration ratio in Southeast Asian markets and demand for high value and performance, our business development strategy has positioned us to capitalize on the growth and expansion of potential emerging markets.

With this initiative in place and the synergy in the customer base and operating experience in the Chinese and Southeast Asian mobile services markets, I’m confident that Linktone is well positioned to develop another sizable and scalable revenue source over the long-term as we strive towards our goal of achieving sustainable healthy growth in profitability.

We were pleased to announce the addition of two new important appointments in July to further solidify the management and leadership changes we have presumably made to the company. We welcome Mr. Oerianto Guyandi, as a member of the company, and Board of Directors; and Dr. Agus Mulyanto as an Advisor to the Board. Mr. Guyandi is currently the Director of PT Media Nusantara Citra, our MNC; the largest and non-integrated media company in Indonesia as well as the Chief Financial Officer of PT Global Mediacom.

Mr. Agus Mulyanto has been the Director of MNC since 2006. He is also a member of Board of Commissioners of PT Rajawali Citra Televisi Indonesia or RCTI and PT MNC Sky Vision and TPI. These appointments are especially important and valuable as we pursue our product in China and Indonesian expansion strategies and accelerate our good prospects. We are continuing to search for additional qualified independent directors, liberal of our experience and skills to further build out our spot leadership.

Thank you and I will now turn the floor over to Colin Sung for his financial review.

Colin Sung

Linktone's second quarter gross revenue from wireless value-added services and other revenues were $18.3 million, compared with $14.8 million on the first quarter of 2009 and $14.5 million in the second quarter of 2008.

Following the termination of our partnership with Tianjin Satellite TV and Qinghai Satellite TV in the second and third quarter of 2008, our traditional media advertising revenue is now reported as discontinue operation and has been excluded from the reporting results for continued operations in both the current and the prior periods in accordance with applicable accounting standards.

SMS revenue was $10.1 million for the second quarter of 2009, compared with $5.6 million for the first quarter of 2009. SMS revenue represented 55% of gross revenue, compared with 38% for the first quarter 2009. Revenue from our [true and FG] products namely MMS, WAP, and Java totaled 0.5 million in the second quarter compared with 0.4 million in the first quarter of 2009.

Data-related services revenue for the second quarter totaled 10.6 million representing 58% of gross revenue, compared with six million or 41% for the first quarter of 2009. The sequential increase in revenue was primarily attributable to an increase in revenue from SMS services as we increase the number of strategic partnerships and content providers.

Audio-related revenue IVR and CRBT were 7.1 million in the second quarter representing 39% of total revenue, compared with 8.3 million or 56% for the first quarter of 2009. The sequential decrease was due to fewer promotional activities in the quarter, compared with active promotion during the spring festival season in the first quarter of 2009.

Now, I will briefly review our key operating benchmarks. Linktone’s gross margin for the second quarter of 2009 was 34% of net revenue or gross revenue minus business tax, compared with 35% for the first quarter of 2009 and 40% for the second quarter of 2008.

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