Beijing : China TransInfo Technology Corp., a leading provider of intelligent transportation systems for highway and urban transportation management in China, today announced that the Company outsourced its taxi media advertising business in Hohhot, the capital city of Inner Mongolia Autonomous Region, and Urumqi, the capital city of Xinjiang Urgur Autonomous Region, to a local advertising agency in exchange for negotiated commission payments.
China TransInfo has the exclusive rights to operate the in-taxi GPS media platform in these two cities until the end of 2023.
In Hohhot, the Company granted Inner Mongolia Shengtang Advertising Co., Ltd. (“Inner Mongolia Shengtang”) advertising rights for five years to operate rooftop LED screens on 5,000 taxis, representing approximately 90% of all the taxis in Hohhot. In exchange for granting these rights, China TransInfo will receive RMB 65.3 million (approximately $9.6 million) over five years, with RMB 10 million (approximately $1.5 million) in 2010 that will grow 15% annually in 2011 and 2012, and 10% annually in 2013 and 2014.
In Urumqi, the Company granted Inner Mongolia Shengtang advertising rights for 13 years, effective from June 2010, to operate rooftop LED screens on 6,500 taxis, representing approximately 90% of all taxis in Urumqi. In exchange for granting these rights, China TransInfo will receive RMB 260.9 million (approximately $38.2 million) over 13 years, with RMB 14 million (approximately $2.1 million) in the first year that will grow 10% annually from 2011 through 2014, grow 5% in 2015, remain flat from 2016 through 2019, grow 5% in 2020, and then remain flat in 2021 and 2022.
Inner Mongolia Shengtang is one of the largest advertising agencies in Inner Mongolia and has been engaged in the advertising business since 2002. The agency has 120 employees in its advertising operation and revenues of over RMB 60 million (approximately $8.8 million) in 2009. The agency’s major customers include local newspapers and television stations, as well as Framedia, a subsidiary of Focus Media Holding Limited.
“The primary reason behind our efforts to develop a taxi media business in Hohhot and Urumqi is to gain exclusive rights for the collection and processing of local real-time traffic data, to operate transportation information services exclusively in those cities, and to obtain advertising revenues based on our exclusive rights. By outsourcing our advertising rights to a professional agency, we now have the opportunity to generate steady cash flows through commissions without the required investments to local advertising operations. Therefore, this enables us to further decrease our operating costs and increase our overall operating margins,” commented Mr. Shudong Xia, Chairman and Chief Executive Officer.
“The outsourcing also allows us to focus on our core business of developing transportation information technologies and solutions and operating transportation information services with a goal of becoming the leading provider of transportation information services and solutions in China.”