PRESS CONTACT:

Shigeyoshi Fujiwara
Corporate Communication,
Faith, Inc.
mail_to_ir@faith.co.jp
TEL: +81-(0)3-5776-6255
 
Faith Group Reorganizes Overseas Businesses
Aiming for V-shaped Recovery in Business Performance
 
Tokyo-February 9, 2007 - Faith Inc. (hereinafter referred to as “Faith TSE stock code: 4295) is pleased to announce that the following items of business were determined during the meeting of the Board of Directors held on today.
■ Sale of contents distribution business division of U.S.A. subsidiary
■ Sale of European contents distribution solutions business subsidiary
■ Segregation and independence through management buy-out (MBO) of U.S.A.
MVNO business subsidiary (transfer of all shares owned by Faith)
 
<Executive Summary>

Reorganization of Faith Group Overseas Businesses
By the reorganization of its overseas business for the purpose of concentrating and optimizing distribution of its management resources, the Faith Group aims to achieve sweeping improvements in results from the next fiscal period.
 
● Sale of Contents Distribution Businesses in U.S.A. and Europe
  To achieve heightened growth in the contents distribution business on the European and American markets where growth is seen to be limited with the Faith Group operating independently, the contents distribution businesses are to be sold to corporations with strengths in contents creation, planning and procurement.
 
  ■ Transfer of the contents distribution business division of U.S.A. subsidiary to Bellrock Media Group
Business transfer of the Contents Distribution Services Division of the U.S.A. subsidiary Moderati, Inc. to a corporation under the umbrella of the Bellrock Media, Inc.
  ■ Determination of policy for sale of European contents distribution solutions business subsidiary
to non-affiliated companies outside the Faith group
Sale of the European contents distribution solutions business subsidiary Digiplug S.A.S to the third party
● Segregation and independence through MBO of MVNO business (Subsidiary transfer and de-coupling concomitant with transfer of all shares owned by Faith)
 
  ■ MBO of MVNO subsidiary Faith Communications, Inc., by Masato Nakanishi, CEO of Faith Communications, Inc., and Senior Managing Director of Faith.
 
The Faith Group today has decided to reorganize its overseas business for the purpose of concentrating and optimizing distribution of its management resources and aiming at achieving sweeping improvements in results from the next fiscal period.
 
1. Sale of U.S.A. and European Contents Distribution Businesses
 
(1) Purpose
  Starting in 2002, Faith has expanded its contents distribution business based comprising music such as incoming call melodies principally for mobile terminals to U.S.A. (establishment of Moderati, Inc. (hereinafter referred to as “Moderati”) in May), Europe (buy-out of Digiplug S.A.S. (hereinafter referred to as “Digiplug”) in August) and China (Faith investment of 51.1% on AnyMusic Limited (hereinafter referred to as “AnyMusic”) in December). Additionally, Faith expanded its service area to include South America through the buy-out of the TakeNET Group in Brazil in March 2005.
On the other hand, factors such as the flood of contents providers and the movement toward self-company distribution by mobile carriers have contributed to a more competitive business environment resulting in a situation where differentiation has become an essential element in the achievement of further growth by provision of contents to meet stringent user needs.
In particular, on U.S.A. and European markets where the demand for higher quality contents is especially high, the potential for growth based on the supply of contents distribution solutions by the Faith Group acting as a sole entity is limited and contribution to enhancement of the corporate value of the Faith Group through further business expansion would need extended period of time and, heightened levels of investment and it is for these reasons that, in order to ensure optimal distribution of limited management resources and positive investment in areas of business with growth potential, Faith has decided to sell its contents distribution businesses in U.S.A. and Europe. The contents distribution business in U.S.A. shall be transferred to a subsidiary of affiliated companies accounted for by the equity method in which invests with the goal of promoting further growth through the group leading to enhancement of the corporate value of the Faith Group.
(2) Details
  1) Contents Distribution Services Business Division of to U.S.A. Subsidiary
    Contents distribution services business division of Moderati, which handles the contents distribution services and technical license business will be transferred to Bellrock Media, Inc. (hereinafter referred to as “Bellrock Media.” Faith holds an investment ratio of 37.6% as of the end of January 2007), a Faith-affiliated company accounted for by the equity method under joint investment with companies such as Yoshimoto Kogyo Co., Ltd. and Intel Capital with outstanding strengths in contents production, planning and procurement.
  2) Sale of European Contents Distribution Solutions Business Subsidiary
    Faith has determined a policy for the sale of all shares of Digiplug,which is a French company that provides business solutions relating to contents distribution such as music labels, by the end of March this year to non-affiliate companies outside the Faith group.
 
2. Segregation and Independence of MVNO Business by MBO
 
(1) Purpose
  To expand its mobile telephone services to the wealthier stratum in U.S.A. Faith transformed Faith Communications, Inc. (hereinafter referred to as “Faith Communications”) into a subsidiary in September 2005. Test services scheduled at the time to be launched between October and December 2005 were postponed until May 2006. Moreover, to ensure smooth and early startup after service commencement based on the results of research into test services, it was decided to prioritize both full complement of data communications services with high needs and increase of customer contact points, resulting in further postponement of the launch of full-scale services originally scheduled for autumn last year to the beginning of this year. Additionally, to give priority to increasing the number of subscribers in the early stages, subscriber prices were cut at an dorastic low level. These changes of business plan have leaded, that December 2005 saw an operating loss of 600 million yen with a forecasted operating loss of 1.7 billion yen for December 2006. Furthermore, the shift into the black of the annual balance planned for December 2007 is not likely to be achieved until December 2009 and the outlook is for heightened demand for the funds necessary to achieve profitability.
To respond with flexibility and mobility to the dramatic changes in the business environment and to positively make investments necessary to achieve optimal distribution of limited management resources and accelerated group growth, the Faith Group has decided to segregate MVNO business, an area requiring the high levels of investment both of time and money. This will make Faith Communications a non-affiliated company and will entirely eliminate the effects of MVNO business, an area where operating losses are forecast to continue beyond the next fiscal period, from Faith’s consolidated performance.
(2) Details
  All shares of the U.S.A. MVNO business subsidiary Faith Communications, a company owned by Faith, will be sold to Masato Nakanishi, CEO of Faith Communications, Inc., and Senior Managing Director of Faith.
In advance of the MBO of Faith Communications, Masato Nakanishi will retire as Senior Managing Director of Faith, effective today.
 
3. Management Structure after Reorganization of Overseas Business
  While overseas business has previously been overseen by Masato Nakanishi, who has retired as Senior Managing Director of Faith today, his duties in this capacity will be taken over by Hajime Hirasawa, CEO/President. Additionally, Katsumi Fujii, operating director and head of the Overseas Business Planning Department, will be responsible for overall supervision of overseas business.
 
Details
■Sale of contents distribution business division of U.S.A. subsidiary, Moderati
1. Profile of Moderati
  1) Name of Company
2) Representative
3) Address
4) Date of Establishment
5) Business Summary
6) Fiscal Year End
7) Number of Employee
8) Capital Stock
9) Main Shareholder
 Moderati, Inc.
CEO Masato Nakanishi
San Francisco, California, U.S. A.
May, 2002
Content distribution service, sound source technology
December
53（Incl. 49 content distribution service）　
20 thousand USD
Faith, Inc. 100%
  10) Financial Highlights of content distribution business　　　　　　（Unit: Thousand USD）
 
  Year Ending Dec. 2005 Year Ending Dec.2006（Forecast)
Sales 15,975 21,581
Operating Profit △127 516
Net Profit
 △38 350
  11) Property for Transfer, Balance of Debt　　　　　　　　　　　　　　　（Unit: Thousand USD）
 
  Year Ending Dec. 2005 Year Ending Dec.2006（Forecast)
Asset(Gross) 12,236 11,144
Balance of Debt 8,90１ 7,459
2. Transferee
  1) Name of Company
2) Representative
3) Address
4) Date of Establishment
5) Business Summary
6) Capital Stock
7) Main Shareholder
8) Business Relations		 MODCO Inc.
Julie Y. Yang
California, U.S.A.
December, 2006
Content distribution service
1USD
Julie Y. Yang 100%
N/A
3. Planned Schedule
  9 February, 2007 Conclusion of the contract regarding the transfer of the content distribution service business from Moderati to MODCO Inc., and the transfer of the
stocks of MODCO Inc. to the Bellrock Media
  16 February, 2007(plan) Completion of the business transfer to MODCO Inc. is planned. As a part of the consideration, Moderati Inc. receives the 20% of issued shares of MODCO Inc., and the 80% of it will be transferred to the Bellrock Media.
  Late February, 2007(plan) Moderati, Inc. will change the company name to Faith West, Inc.
MODCO Inc. will change the company name to Moderati, Inc.
4. Financial Impact
  As Moderati settles the fiscal year in December, no impact of this transaction is expected on the consolidated financial forecast announced on 17 November, 2006 for the fiscal year ending March 2007 The extraordinary gain of 700 million yen from the transfer of the business will be incorporated into the consolidated financial forecast for fiscal year ending March 2008.
Faith group is now working for the consolidated financial projection ending March 2008 and will be announced as soon as it is available.
 
■ Segregation and independence through management buy-out (MBO) of U.S.A. MVNO business subsidiary, Faith Communications, Inc.
1. Profile of Faith Communications
  1) Name of Company
2) Representative
3) Address
4) Date of Establishment
5) Business Summary
6) Fiscal Year End
7) Number of Employee
8) Capital Stock
9) Outstanding Stock
10) Main Shareholder		 Faith communications, Inc
CEO Masato Nakanishi
Los Angeles, California, U.S.A.
January, 2005
Mobile telecommunication business
December
69　
42 thousand USD
4,263 thousand
Faith, Inc. 87.95%
  11) Financial Highlights　　　　　　　　　　　　　　 　　　 　 　 　 　 　 　（Unit: Thousand USD）
 
  Year Ending Dec. 2005 Year Ending Dec.2006（Forecast)
Sales 0 208
Operating Profit △5,450 △14,535
Net Profit △5,412 △17,226
Asset(Gross) 12,946 5,958
Asset(Net) 10,367 △6,870
2. Transferee
  Masato Nakanishi  
3. Detail of the shares transfer
 
1)Number of stock held before the transfer
2)Number of stock transferred
3)Number of stock held after the transfer		 3,750,000(87.95% of outstanding stock)
3,750,000(Transfer price: TBA)
Nil(Nil of outstanding stock)
4. Schedule
  9 February, 2007 Resignation of Masato Nakanishi from the board of Faith, Inc.
  9 February, 2007(plan) Conclusion of the contract regarding the transfer of all the shares of
Faith Communications, Inc. what Faith, Inc. holds to Masato Nakanishi
  26 February, 2007(plan) Sale of the shares
  Late February, 2007(plan) Faith Communications, Inc. changes the company name to Voce Wireless, Inc. (tentative name)
5. Financial Impact
  As Faith Communications, Inc. settles the fiscal year in December, no impact of this transaction is expected in terms of the sales figure and the recurring profit on the consolidated financial forecast announced on 17 November, 2006 for the fiscal year ending March 2007. The loss of 1 billion yen (3.2 billion yen at non-consolidated basis) from the loan loss allowance and impairment will be incorporated as the extraordinary loss.
Faith group is now working for the consolidated financial projection for the fiscal year ending March 2008 and will be announced as soon as it is available.
 
■Profile of European contents distribution solutions business subsidiary, Digiplug
  1) Name of Company
2) Representative
3) Address
4) Date of Establishment
5) Business Summary
6) Fiscal Year End
7) Capital Stock
8) Main Shareholders		 Digiplug. S.A.S.
President Masato Nakanishi
Paris, France
March, 1998
Digital contents distribution solution
December
859 thousand EUR
Faith, Inc. 100%
 
MVNO（Mobile Virtual Network Operator）
An MVNO is a mobile telecommunications company that uses the telecommunications infrastructure of another mobile phone operator as its host network. The MVNO market is expected to expand both in North America and worldwide, and is estimated to reach a scale of US$ 11 billion and 35 million users by 2010, according to Pyramid Research, a US growth strategy expert.
 
The Bellrock Media Group
Bellrock Media, Inc. was established in the U.S. in 2005 through investments by various companies, including Faith and Intel, as a central part of the Yoshimoto Kogyo Group, a comprehensive entertainment group. The Japanese corporation Bellrock Media Japan, Inc is a wholly owned subsidiary of the company. The Bellrock Media Group is developing the branded entertainment business, its core business, in both the U.S. and Japan.
For more information, visit http://www.bellrockmedia.com/
 
Intel Capital
Intel Capital is the investment division of Intel and is responsible for shares investment in companies worldwide possessing innovative technology. Intel Capital invests in a wide range of companies supplying hardware, software and services in the fields of Internet and semiconductor manufacturing technology for companies, households, mobility, healthcare and consumers. Since 1991, Intel Capital has invested a cumulative total of 6 billion dollars in approximately 1,000 companies in 30 countries across the globe. Of the companies Intel Capital has invested in, approximately 180 have been bought out by third party companies while 155 have announced shares on various stock markets throughout the world. In 2006, Intel Capital invested a total of approximately 1.07 billion dollars in companies around the world, 60% (excluding investment in Clear Wire) of which was invested in regions outside America.
For more information, visit http://www.intel.co.jp/jp/capital/
 
Digiplug
Based in France, Digiplug supplies music mobile contents distribution services to music labels such as Universal Mobile International, Warner Music International, and Sony-BMG France as well as to major mobile telephone service companies and mobile terminal device manufacturers in Europe.
For more information, visit http://www.digiplug.com/
 
About Faith, Inc.
Faith was the first company in the world to design and apply “ring tones” for mobile telephones and expanded its business activities not only within Japan, but also into 21 countries throughout the world including North America, Europe, the Asia-Pacific region and South America. Moreover, the company provides electronic money service used for settlement of accounts for on-line games, music distribution and e-commerce. In the United States, Faith also provides mobile telephone services (MVNO service) targeted towards a specific customer segment. In the future, Faith further aims to be a high added-value service company through the creation on a global scale of “a new scheme for the distribution of digital contents” in various environments such as mobile telephones and PCs.
For more information, visit http://www.faith.co.jp/
 
©2007 Faith, Inc, All Rights Reserved.