Letter from Kluge/Subotnick w/China field trip report (lookin' good!):
Monday, February 9, 1998 10:07 AM
> Editors Note: This is not a news release.
The following is a Letter to Shareholders from John W. Kluge, Chairman and Stuart Subotnick, Vice Chairman, President, and Chief Executive Officer:
Dear Shareholders:
As you probably know, China's telecommunications markets are ones in which the penetration rate of telephone usage is very low. In this context, to further develop Metromedia International Group's (MMG:Amex) current projects in China and to help foster new ones, we recently returned from an extensive good-will tour through China, where we visited with distinguished members of China's government and business community. Reflecting on our trip, we are pleased to report that our optimism about MMG's opportunities in China has never been higher. China has undergone extraordinary change during the past twenty years, and MMG is diligently working to capitalize on this change. China's Ministry of Post and Telecommunications (MPT) reported that from January to August, 1997, China's post and telecommunications traffic turnover grew 33% versus the same period in 1996, and revenues rose nearly 40% to $13 billion between January and August. As an example of the state of China's telecommunications industry, according to the MPT, China had over 13 million mobile subscribers at year-end, up from approximately 3,000 subscribers ten years ago. This represents a penetration rate of less than 1%. The United States currently has 50 million subscribers, representing a 19% penetration rate. This difference is one reason why we think the business opportunities for MMG in China are so exciting. Executive representatives of MMG on the tour included ourselves; Max E. Bobbitt, President and Chief Executive Officer of Metromedia Asia Corporation (MAC); Sam Belzberg, Director of MAC; Mark Hauf, MAC's Chief Operating Officer; G. Mont Williams, MAC's Chief Technical Officer; Martin Barnes, MAC's Chief Information Officer; Silvia Kessel, Director and Chief Financial Officer of MMG; and Richard J. Sherwin, Co-President of Metromedia International Telecommunications, Inc. We were hosted by President Jiang Zemin, at the Zhongnanhai Central Government Compound in Beijing. During this meeting, we believe that we strengthened MMG's relationship with the Chinese leadership, and garnered their support for MMG's activities in China. After our meeting with the President of China, we enjoyed dinner with Mr. Sun Zhenyu, Vice Minister of China's Ministry and Foreign Trade and Economic Cooperation (MOFTEC). If MMG wants to invest more than $30 million in a specific telecom project in China, MOFTEC's approval is required. While meeting with Mr. Sun, we learned about China's most pressing needs, expressed our interest in working with MOFTEC, and sought his advice on what else MMG can do to help China. We were most pleased with this meeting. We lunched with Mr. Zhang Fuyou, Vice Chairman of China's CESEC, which is the commercial arm of China's People's Liberation Army. During lunch we discussed Great Wall--a joint venture between China Telecom and the CESEC that will construct a national CDMA cellular network. In our view all of our meetings were successful. As developments may warrant, we'll report to you further.
Sincerely,
John W. Kluge Chairman
Stuart Subotnick Vice Chairman, President, and Chief Executive Officer
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