Contents :

1. INTRODUCTION

Nextnation Communication Berhad (“Nextnation” or “Company”) wishes to announce that the Company’s subsidiary, Godynamic Investments Limited (“Godynamic”) proposes to acquire one (1) ordinary share of par value of USD1 in Vision Phoenix Group Limited (“VPGL“), representing the entire issued and paid-up capital of VPGL for a cash consideration of USD1.

Upon the completion of the Proposed Acquisition, VPGL will be a wholly-owned subsidiary of Godynamic.


2. INFORMATION ON VPGL

VPGL is a private limited company incorporated on 23 November 2006 under the laws of the British Virgin Islands. Currently, the authorized share capital of VPGL is USD50,000 divided into 50,000 ordinary shares of USD1 each. The issued and fully paid-up share capital of VPGL is one (1) ordinary share of USD1.

VPGL is currently dormant. However, VPGL will be the holding company of a wholly-owned foreign entity to be incorporated in the People’s Republic of China (“WOFE”) for the provision of the next generation mobile video streaming technology and high capacity value-added telecommunication services. The WOFE will be the first in the China market using Nextnation’s MINDCEP™ technology to provide mobile video streaming service platform, broadband and other applications and services at rapid speed and high quality to customers. These innovative services will allow WOFE to compete in the highly open telecom market in China. The initial intended investment in VPGL will be USD250,000 via Nextnation and its subsidiaries’ (“Nextnation Group”) cash injection from internally generated funds. This investment will result in increase in VPGL’s paid-up share capital from USD1 to USD250,000 and VPGL’s authorized shares capital will be increased from USD50,000 to USD2 million.


3. RATIONALE FOR THE PROPOSED ACQUISITION

China has the highest population in the world with a total population in excess of 1.3 billion people. Based on various studies, the total mobile penetration rate in China stood at approximately 30% only. This provides a good opportunity for the Nextnation Group to fast track its overseas market expansion plan.

The Proposed Acquisition is a positive move for the Nextnation Group to broaden its market share through WOFE’s gaining access into the China market as well as enlarging the Nextnation Group’s range of telecommunication products and services.


4. PROSPECTS

The economic growth of China is targeted to register growth of about 8% in 2007, following the recent economic slowdown plan by the leaders of China after four (4) years of double-digit expansion (Source: iht.com). Nevertheless, the targeted 8% growth remains one of the highest in the world, and the China market continues to maintain its positive outlook and attractiveness.

As of July 2006, China has 366 million fixed-line subscribers and 431 million mobile customers. Chinese telecom operators focus their effort on voice. Revenues from data only account for 5% (Source: en.wikipedia.org). According to China Telecom Sector Analysis (2006-2007), a research report by RNCOS Group, the fixed line subscriber base is expected to grow at the rate of less than 4-5% for the period 2006-2009. It is estimated that the subscriber base will reach at the level of about 425 million by the end of 2009. On the other hand, by 2010, China’s mobile subscribers will increase to about 640 million. In addition, the improvement in network construction will lead to more and more 3G subscribers and in the next 5-6 years, the 3G subscribers will be about 40% of the overall market. The broadband subscriber base is also expected to grow at the rate of more than 21% to reach the level of about 101 million by the end of 2009 (Source: electronics.ca).


5. RISK FACTORS

As the operations of WOFE will be largely similar to the existing operations of the Nextnation Group, WOFE will be exposed to risks similar to that of the Nextnation Group, the majority of which are set out in the Prospectus of Nextnation dated 9 August 2005. A summary of the risk are set out below:

5.1 Business Risks

WOFE will be subject to certain risks inherent to the telecommunication industry. These include but are not limited to intensity of competition, demand for its services and products, changes in general economic, business and credit conditions, entry of new competitors, fluctuation in foreign exchange rates and introduction of new technology, services and products.

5.2 Competition Risks

WOFE may face competition from both foreign and local companies which offer similar products and services. Existing and new entrants can heighten competition and pose challenge to WOFE in the future.

5.3 Acquisition Risks

There can be no assurance that the anticipated benefits of WOFE will be realized, or that the Nextnation Group will be able to generate sufficient revenues from WOFE to cover the expenses of maintaining office and operations in China.

5.4 Foreign Investment Risks

As the investment in WOFE is deemed as a foreign investment, it may be subject to the policies of the Chinese Government on foreign investment. Any unexpected changes in laws and regulations, currency control policies, taxation, repatriation of profit/fund and import and export restrictions may adversely affect the rights and performance of the Nextnation Group with respect of its investment in WOFE.

5.5 Foreign Exchange Risks

The Nextnation Group will be potentially exposed to foreign exchange risks pursuant to the investment in WOFE. At present, the Nextnation Group does not use any financial instruments to hedge its exposure against transactions in foreign currencies. However, the Nextnation Group will continue to assess the need to utilize financial instruments to hedge its currency exposure, taking into consideration factors such as foreign currency involved, exposure period and transaction costs. There is no assurance that any future significant fluctuation in the exchange rates and financial crisis will not materially and adversely affect its financial position.

6. FINANCIAL EFFECTS

6.1 Share capital and substantial shareholders’ shareholdings

The Proposed Acquisition will not have any effect on the share capital of Nextnation and its substantial shareholder’s shareholdings as the purchase consideration and intended investment capital shall be fully satisfied by cash.

6.2 Earnings

The Proposed Acquisition is expected to contribute positively to the future earnings of the Nextnation Group.

6.3 Gearing and Net Assets

The Proposed Acquisition will not have any material effect on the gearing of the Nextnation Group. As the Proposed Acquisition is expected to contribute positively to the future earnings of the Nextnation Group, the net assets of the Nextnation Group may improve accordingly in the future.

7. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

None of the Directors or substantial shareholders of Nextnation or persons connected to them have any interest, whether direct or indirect, in the Proposed Acquisition.


This announcement is dated 18 December 2006.