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Cellcast and Canaan Partners to form new Asian digital media venture

21 August 2007

Highlights:

• Cellcast Asia Holdings ("Cellcast Asia") established as a new vehicle for pan Asian regional distribution of its interactive products and services.
• Cellcast plc to inject 100% of its shares in Cellcast India and its 50% holding in its SE Asian based JV with Malaysian listed mTouche into Cellcast Asia
• US$5.25 million raised from new investor Canaan Partners to fund rapid regional expansion and strengthen Cellcast's and Cellcast Asia's balance sheets
• Significantly reduces Cellcast's operating costs moving forward
• Canaan brings extensive global experience in the IT and media sector to support the existing strength of Cellcast Asia's management team
• Cellcast will retain 37.5% investment in Cellcast Asia - a holding now valued at US$5.1m.

Cellcast plc (AIM: CLTV), the global interactive digital broadcaster, announced today the establishment of Cellcast Asia Holdings ("Cellcast Asia") to meet the strong demand for interactive digital entertainment in the Asia and South-East Asia regions.

Cellcast is injecting its 100% holding in Cellcast Interactive India Pvt Limited ("Cellcast India") and its 50% holding in Cellcast SEA Limited ("Cellcast SE Asia") into the new venture. At the same time, Cellcast has conditionally agreed to issue US$5.25m of Series A Preferred Stock (the "Preferred Stock") to Canaan Partners ("Canaan"), a global venture capital firm. The Preferred Stock issue values the enlarged share capital of Cellcast Asia at US$13.5 million.

Cellcast will hold 37.5% of the fully diluted share capital of Cellcast Asia, valuing this portion of the business at US$5.1 million (£2.6 million) compared with an investment cost of US$1.4 million (£0.7 million). Canaan will hold 38.9%. The remaining shares are to be held by a trust which will administer share option plans for existing and future employees of Cellcast India.

Andrew Wilson, CEO of Cellcast, said: "The investment by Canaan, a specialist investor in the information technology sector, confirms the strength of our commercial proposition. The opportunity in this region is of such a size that it exceeds Cellcast's ability to realise it alone. The investment by Canaan Partners is a strong endorsement of Cellcast's market-leading proprietary technology and applications, and recognition of the proven skills and sector experience of its established Asian-based management team. The establishment of this dedicated regional operation and its independent funding through Canaan Partners, is the most effective way for Cellcast plc to realise its growing Asian ambitions whilst retaining resources for reinvestment in other technological and geographical areas".

Cellcast Asia will be led by Pankaj Thakar, previously CEO of Cellcast India, who brings to the venture over twenty years experience of building and managing companies in the computer, telecom and wireless sectors. The company will be headquartered in Mumbai, India, and will serve a market of over 2 billion consumers in India, Sri Lanka, Pakistan, Bangladesh, Malaysia, Singapore, Thailand, Indonesia, Vietnam, Laos, Cambodia and the Philippines.

The new company will build on the success of Cellcast India and Cellcast SE Asia in developing significant demand for Cellcast's multi-platform interactive formats and programmes. The region has some of the fastest growing mobile, multi-channel television and online digital entertainment markets in the world, particularly in India, which added 15.5 million mobile subscribers in the first quarter of this year, taking the total to 165.1 million, and where the TV industry is expected to grow at a compound annual rate of 22 per cent over the next five years.

Pankaj Thakar, Cellcast Asia's new CEO, said: "The rapid growth in mobile penetration in the region, together with the continuing expansion of the multi-channel television industry, are creating major opportunities for Cellcast's digital entertainment products. By combining the resources of Cellcast India with the strong market position of our partner mTouche, we are creating a powerful regional distribution capability with a combined network of relationships with over 20 leading regional broadcasters and over 30 telecoms operators. The exciting participation of Canaan Partners will enable us to accelerate growth through investment in new formats and applications and the expansion of our management team to support our regional initiatives."

Alok Mittal, Managing Director - India, Canaan Partners, said, "With mobile phones fast becoming a general-purpose interaction device in the hands of nearly two billion consumers worldwide, interactive digital entertainment is increasingly becoming an intrinsic part of the mobile users across generations. We are very upbeat about Cellcast's future which has emerged as one of the most promising companies in this sector developing and distributing proprietary applications and television programming in markets across the world. The company constantly develops new formats for applications and interactive programming suitable for emerging media platforms including 3G, IPTV, enhanced broadband, mobile video and wireless broadband services. Cellcast is Canaan Partners' first investment in the growing trend of value added services in India."

Cellcast Asia
Cellcast Asia Holdings is a holding company whose principal investments will be its 100% holding in Cellcast India and its 50% holding in Cellcast SE Asia.

Cellcast India
Cellcast Interactive India Pvt Limited was established in November 2005 as a wholly-owned subsidiary of Cellcast plc and its first TV series launched in mid-2006 became a landmark in the Indian television industry. The company is a pioneer in developing integrated participation content to address the entertainment demands of India's 112 million TV households (62% of which are pay-TV households) and 165 million mobile phone subscribers. The company recently extended its operations to Sri Lanka. For the 14 month period ended 31 December 2006, turnover of Cellcast India amounted to Indian rupees 65m (£780,000) with a loss before tax of Indian rupees 21.7m (£260,000). Net assets at that date amounted to Indian rupees 30.0m (£350,000) including the intercompany loan account of Indian rupees 44.7m (£520,000).

Cellcast SE Asia
Cellcast SEA Limited is a joint venture between Cellcast and mTouche Technology Berhad and provides leading edge multi-platform digital entertainment applications, formats and technology to the fast-developing South East Asian region. Headquartered in Kuala Lumpur, Cellcast SE Asia has launched successful participation TV shows on TV3, Malaysia's leading terrestrial broadcaster, and will soon roll out interactive television and mobile programming throughout the region. MESDAQ-listed mTouche is a leading provider of mobile messaging technologies and interactive media applications in South-East Asia. Cellcast SE Asia was established in September 2006, and for the 4 month period ended 31 December 2006, turnover amounted to HKD 1.6m (£103,000) with a loss before tax of HKD 0.5m (£33,000). Net assets at that date represented a negative figure of HKD 0.4m (£26,000) excluding Cellcast intercompany loan account of HKD 0.8m (£53,000).

The Preferred Stock
The issue of the Preferred Stock is subject to closing which is expected to occur not later than 21 August 2007. The Preferred Stock will on issue pay an annual non-cumulative dividend of 8% per annum in preference to any dividend on the ordinary shares of Cellcast Asia. It will carry equal voting rights to the ordinary shares and will be convertible at any time into ordinary shares on the basis of one ordinary share for one share of Preferred Stock. At the end of five years from closing, Cellcast Asia may be required to redeem the Preferred Stock at the higher of cost or fair market value and, in those circumstances, a breach by Cellcast Asia of the redemption provisions in its articles of association may trigger a right for the holder(s) of the Preferred Stock to put the Preferred Stock on Cellcast plc. Purchase of the Preferred Stock under the put option would be subject to the requirements of the AIM Rules for Companies and any other applicable regulation or legislation.

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Notes to Editors:

Cellcast plc
Cellcast plc (AIM: CLTV) is a leading international provider of participation television applications and interactive mobile content in the fast-growing multi-platform digital entertainment sector. Headquartered in London, with associated operations in Paris, Beirut, Mumbai, Hong Kong and Sao Paolo, Cellcast's applications and programming are distributed on the Sky Digital and Freeview platforms in the UK, and the company is partnered with broadcasters and telecom networks in Europe, the Middle East, India, South-East Asia, China, and South America. Cellcast plc joined the AIM market of the London Stock Exchange in 2005.

Canaan Partners
Canaan Partners invests in visionary entrepreneurs and provides them the networks, insights and operational guidance required to build high-performance technology and healthcare companies. For 20 years, they have taken an active and committed role in the companies in which they invest, and have completed more than 67 mergers and acquisitions and 51 IPOs. With $2.3 billion under management and a worldwide footprint, the firm's technology team is committed to catalyzing the growth of innovative companies in the digital media, communications & mobility, enterprise and clean tech industries. Among its successes are DoubleClick, the leading online advertising solution, Match.com, the most popular online dating site in the world, and Acme Packet, one of the top ten performing IPOs of 2006. Other Canaan technology investments include SuccessFactors, The Active Network, Blurb, Dexterra, GroundWorks and ID Analytics. Canaan has offices in California, Connecticut, India and Israel. For more information visit: www.canaan.com