Telestone Technologies Corporation Announces Fourth Quarter and Full Year 2007 Results

Full Year Revenues Increase 55% to US $33.6 million; Net Income Up 31% to US

$6.0 million

BEIJING, March 24 /Xinhua-PRNewswire-FirstCall/ -- Telestone Technologies Corporation Ltd. ("Telestone") , a leading developer and provider of wireless communication coverage solutions based in the People's Republic of China, today announced its unaudited financial results for the fourth quarter and full year of 2007.

Fourth Quarter Highlights: -- Revenue for the quarter increased to US $12.6 million, up 68% from the same quarter in 2006. -- Gross profit increased 46.3% year-over year to US $6.3 million. -- Net income of US $2.3 million, up 43.8% from the same quarter in 2006. Full Year 2007 Highlights: -- Revenue for the year increased to US $33.6 million, up 55% from 2006. -- Gross margins of 50.8%, flat when compared to the 50.8% in 2006. -- Gross profit increased to US $17.0 million, up 54.7% from the US $11.0 million in 2006. -- Net income of US $6.0 million, up 30.9% from 2006.

"I am extremely pleased that the fourth quarter brought a strong close to a successful year for Telestone, with our Company providing leading wireless communications coverage solutions to a diverse set of customers," commented Mr. Han Daqing, Chairman and Chief Executive Officer of Telestone. "Our WFDS product continues to receive positive feedback from potential clients, resulting in a growing revenue stream from that industry-leading product."

"After successful acquisition of Shandong Guolian in 2007, we will continue targeting domestic companies that can provide value-added products and solutions or occupy a leading market share in provincial markets. We will also ensure the necessary investments in our technology to ensure we continue to meet the needs of our future customers, who, due to our focused efforts during the year, are increasingly international."

Full Year 2007 Financial Results:

Telestone reported full year revenue of US $33.6 million, up 55% compared to US$21.7 million in 2006, largely due to an increase in demand for products and services from China Mobile and China Unicom. While the Company experienced a slight decline in revenues from China Netcom and China Telecom during the year, revenue from other customers rose over 300% to over US $1 million.

Gross profit of US $17.0 million was an increase of 55% from the US $11.0 million of 2006, with gross margin for the year of 50.8%, steady with the 50.8% reported in 2006. The gross profit increase during the year is primarily attributable to the Company's strong revenue growth during the year and the ability to maintain a strong gross margin level. Due to these factors, net income for 2007 rose significantly to US $6.0 million from US $4.6 million in the year ago period.

Recent Operational Highlights: Recent accomplishments include: -- The listing of the Company's Wireless Fiber Distribution System (WFDS), a leading wireless indoor coverage solution, as a candidate on China Mobile's annual purchase list. Listing Telestone's solutions and products as candidates presents the opportunity for the Company's products to be purchased on a large scale by China Mobile during the coming year. This follows the positive responses received China Mobile during the third quarter on their WFDS field tests, and demonstrates the long term potential of the WFDS solution. -- The Company announced winning license approvals and signing initial sales agreements in Russia, which to date have a total value of approximately US$150,000 for Telestone to supply RF equipment to several Russian partners on a trial basis. Telestone also signed initial sales agreements in both Brazil and Mexico during the fourth quarter, and Telestone CDMA signal repeater products were approved for licensing agreements by the Federal Communication Commission in the United States. These agreements mark important steps taken by the Company to expand into international markets, and come as a result of efforts made by Telestone's recently formed overseas subsidiary, the Beijing Telestone Communication Technology Corp. -- The Company successfully incorporated Shandong Guolian, a leading provider of wireless coverage services in Shandong province acquired in the third quarter of 2007. The acquisition has been a positive experience for Telestone and will provide strong long-term benefits, regarding not only Shandong Guolian's performance and contribution to Telestone but through the facilitation of the acquisition process for the future. Business Outlook

In May 2008, a significant re-organization of the Chinese telecom industry is scheduled to occur, resulting in additional telecom carriers and greater competition among them, with an expected increase in capital investment overall. While Telestone is confident of sustained revenue growth in 2008, due to the direct impact of this event on the demand for the Company's products and services, it will only be in a position to provide official and detailed outlook after fully assessing the post-reorganization market environment.

Conference Call

The Company's management team will conduct a conference call on Wednesday, March 25, 2008 at 5:00 am (Pacific)/8:00 am (Eastern)/8:00 pm (Beijing/Hong Kong).

U.S. callers please dial: [phone] (toll free) European callers please dial: [phone] Asian callers please dial: [phone] Passcode: 8149391

A live audio webcast of the conference call will also be available through our new corporate website, please visit: http://www.telestone.com/english .

A replay will be available after the end of the call until March 29th. U.S. callers please dial: [phone] European callers please dial: [phone] Asian callers please dial: [phone] Passcode: 8149391 About Telestone Technologies Corporation

Telestone provides wireless communications coverage solutions primarily in the PRC. These solutions include products such as repeaters, antennas and radio accessories. Telestone also provides services that include project design, project management, installation, maintenance and other after-sales services. Telestone currently has approximately 800 employees. For more information please visit http://www.telestone.com/ .

For further information please contact: Telestone Technologies Corporation Ltd. Nick Li Secretary of the Board Tel: [phone] x1201 Email: [e-mail] Cui Tel: [phone] x1202 Email: [e-mail] Beijing Julian Wilson Tel: [phone] Email: [e-mail] New York Peter Schmidt Tel: [phone] Email: [e-mail] Harbor Statement

Statements about the Company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward-looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The Company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the Company undertakes no obligation to update forward-looking statements.

Appendix: Financial Statements of Telestone Technology Corporation Ltd. Consolidated Statements of Operations and Other Comprehensive Income (Dollars in thousands except share data and per share amounts) Years ended December 31, 2007 2006 US$'000 US$'000 Operating revenues: Net sales of equipment 24,456 16,769 Service income 9,122 4,939 33,578 21,708 Operating expenses: Equipment and services 16,534 10,691 Sales and marketing 4,614 2,917 General and administrative 3,911 1,674 Research and development 822 605 Depreciation and amortization 288 241 Total operating expenses 26,169 16,128 Operating income 7,409 5,580 Interest expense (100) (55) Other income, net 727 442 Income before income taxes 8,036 5,967 Income taxes (1,998) (1,353) Net income 6,038 4,614 Other comprehensive income Foreign currency translation adjustment 2,002 650 Comprehensive income 8,040 5,264 Earnings per share: Weighted average number of shares outstanding Basic 9,578,956 8,682,736 Dilutive effect of warrants 108,141 52,879 Diluted 9,687,097 8,735,615 Net income per share of common stock US$ US$ Basic (US$) 0.63 0.53 Diluted (US$) 0.62 0.53 Consolidated Balance Sheets (Dollars in thousands except share data and per share amounts) As of December 31, 2007 2006 ASSETS US$'000 US$'000 Current assets: Cash and cash equivalents 5,473 3,380 Accounts receivable, net of allowance 45,013 29,777 Due from related parties 1,792 1,409 Inventories 8,023 5,048 Prepayment 1,169 315 Other current assets 1,332 373 Total current assets 62,802 40,302 Goodwill 3,119 -- Property, plant and equipment, net 1,170 821 4,289 821 Total assets 67,091 41,123 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term loan from related parties 28 -- Short-term bank loans 2,051 1,279 Accounts payable - Trade 7,614 6,314 Customer deposits for sales of equipment 262 20 Due to related parties 2,318 2,001 Taxes payable 4,741 2,571 Accrued expenses and other accrued liabilities 7,221 4,668 Total current liabilities 24,235 16,853 Long term loan from related parties 30 -- Commitments and contingencies 24,265 16,853 Stockholders' equity: Preferred stock, US$0.001 par value, 10,000,000 shares authorized, no shares issued -- -- Common stock and paid-in-capital, US$0.001 par value: Authorized - 100,000,000 shares as of December 31, 2007 -- -- Issued and outstanding - 10,404,550 shares as of December 31, 2007 and 8,935,106 shares as of December 31, 2006 11 9 Dedicated reserves 3,199 2,619 Additional paid-in capital 18,989 8,475 Other comprehensive income 3,017 1,015 Retained earnings 17,610 12,152 Total stockholders' equity 42,826 24,270 Total liabilities and stockholders' equity 67,091 41,123 Consolidated Statement of Cash Flow (Dollars in thousands except share data and per share amounts) Years ended December 31, 2007 2006 US$'000 US$'000 Cash flows from operating activities Net income 6,038 4,614 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 260 240 Provision for doubtful accounts 1,512 383 Write-off of property, plant and equipment 56 -- Profit on disposal of property, plant and equipment -- (239) Changes in assets and liabilities: Accounts receivable (10,088) (6,896) Inventories, net (1,629) (2,686) Due from related parties 154 (44) Prepayment 56 237 Other current assets (527) (125) Accounts payable (1,362) 1,953 Due to related parties 113 (202) Customer deposits for sales of equipment (195) 16 Taxes payable 143 (3,166) Accrued expenses and other accrued liabilities 1,594 2,910 Net cash used in operating activities (3,875) (3,005) Cash flows from investing activities Purchase of property, plant and equipment (270) (148) Proceeds from disposal of property, plant and equipment -- 391 Acquisition of subsidiary, net of cash disbursed (186) -- Net cash (used in) provided by investing activities (456) 243 Cash flows from financing activities Proceeds from issuance of common stock 5,454 1,075 Proceeds from short-term bank loan 2,051 1,279 Repayment of short-term bank loan (1,630) -- Repayment of long-term loan (12) -- Net cash provided by financing activities 5,863 2,354 Net increase (decrease) in cash and cash equivalents 1,532 (408) Cash and cash equivalents, beginning of year 3,380 3,605 Effect on exchange rate changes 561 183 Cash and cash equivalents, end of year 5,473 3,380 Supplemental disclosure of cash flow information Interest received 37 20 Interest paid (100) (55) Tax paid (1,237) (1,154) Non-cash investing activity Issuance of common stock arising from acquisition of a subsidiary 5,062 --