City Telecom Announces FY06 Annual Results

Net loss narrowed to HK$92.2 million in FY06 from HK$213.3 million in

FY05

-- EBITDA improved to HK$245.2 million in FY06 from HK$58.6 million in

FY05, with rising EBITDA margin trend of 18.8% in 1H FY06 to 23.6% in

2H FY06

-- Successfully shifted focus from subscriber to revenue market share

resulting in Fixed Telecom Network Services turnover increasing by

22.6% to HK$741.3 million

City Telecom (HK) Limited (Nasdaq: CTEL) today announced a large reduction of net loss to HK$92.2 million in its 12 months to 31 August 2006 annual results compared with a loss of HK$213.3 million the previous year, driven by the healthy growth in fixed telecom network services ("FTNS").

"We are encouraged by our FY06 achievements. We saw a strong positive network effect driving a rapidly growing pool of word-of-mouth referrals that is now a major source of new acquisitions of our services. We made significant progress in our drive for customer service excellence, and was recognized as an industry leader with the conferring of several service awards. These factors contributed to the strong growth of our FTNS turnover, thereby strengthening our position in this competitive market," said Ricky Wong, chairman of CTI.

Total turnover increased by 2% to HK$1,159.6 million with strong growth in FTNS by 22.6% to HK$741.3 million more than compensating the 21.5% decrease in International Telecommunications Services business ("IDD") to HK$418.3 million. FTNS now contributes 63.9% of our total revenue.

Our EBITDA improved from HK$58.6 million, 5.1% margin to HK$245.2 million, 21.1% margin, respectively for FY05 and FY06. Throughout the second half of 2006, CTI recorded significant improvements in its EBITDA margin, with 23.6% in the second half, compared to 18.8% in the previous six months.

"During the year, we successfully shifted our strategic focus from subscriber to revenue market share. With the impact of this transition, our subscription base slightly fell, yet the revenue is driven up, enabling a healthy transformation of our business," Mr. Wong said.

"The Company is confident to the years ahead and will continue to strive for higher operation efficiency, revenue market share and premium branding. We stand more committed than ever, to contribute to the Hong Kong telecom industry, and to the Hong Kong society," Mr. Wong concluded.

Please download full release at http://www.ctihk.com .

For enquiries, please contact:

Ms Jessie Cheng

Tel: +852-3145-4118

Email: chengcm@ctihk.com