Elephant Talk Acquires WestSMS, A Leading Chinese Independent Mobile Service Provider Initiates First Move in China's Wireless Value-Added Service Sector LOS ANGELES, May 18 /PRNewswire-FirstCall/ -- Elephant Talk Communications, Inc. ( http://www.elephanttalk.com/ ) (BULLETIN BOARD: ETLK) announced today that it has entered into a definitive agreement to acquire a majority equity interest in General System Technology Limited, known as WestSMS ( http://www.westsms.com/ ), a leading independent mobile value-added service provider in China. The Company will use this acquisition as the cornerstone in its transition to higher margin telecommunications services in China. In addition to WestSMS acquisition, ElephantTalk has completed negotiations for another equity investment in this sector to be announced shortly, further accelerating the company's move into the profitable and rapidly expanding wireless value-added service industry. WestSMS, a newly developed and leading independent mobile value-added service provider in China, currently has more than 1 million monthly registered subscribers of its mobile phone short messaging service with revenues exceeding RMB10 million in 2003. The company has 100 employees with service coverage areas spanning thirty major cities and provinces in China. WestSMS recently signed an agreement with China Eastern Airline's Eastern Miles Program to provide customer relationship management (CRM) and marketing solutions to its frequent flyer program using WestSMS' mobile phone short message service infrastructure. This agreement is projected to boost subscriber totals to exceed 3 million at the end of 2004 with additional strong growth projected for 2005. In the past two years, China has seen tremendous growth in the usage of Short Messaging Service (SMS) to mobile users. The growth has been driven by an explosive increase in the number of mobile phone subscribers, topping over 250 million in 2003. Average annual growth of mobile data usage and services is expected to increase over 100% over the next several years, surpassing Internet usage. China's Ministry of Information Industry figures show that the country's 260 million mobile phone users sent a total of 220 billion SMS messages last year to shore up the booming "thumb economy." "In addition to our new business with China Eastern Airlines we plan to introduce a new value-added service to our subscribers by using SMS/IVR/WAP to buy lottery tickets," said Mr. Lin Xiao Jian, CEO of WestSMS. "Within seconds, our subscribers will receive a confirmation of their request to purchase their lottery ticket. The service will automatically inform the subscriber if he/she wins the lottery and a prize. We feel this will be an another big hit for WestSMS and open up additional high-margin markets for our wireless services". "SMS is the most exciting and cost effective direct marketing and advertising method available to business. It can be interactive like the web, has an enormous reach like television, targets users like direct mail, and is ideal for brand reinforcement", said Mr. Russelle Choi, Chairman and CEO of ElephantTalk. "Most of the existing SMS service providers are focusing their resources on addressing the entertainment needs of mobile phone subscribers, while acknowledging the need of expanding market share in the area. Our long term strategy is to establish our core competence in developing business applications and serving the business needs of large corporate clients by leveraging the cost effective function of SMS and our expertise in wireless and telecommunications industry." The transaction is expected to close by Q2 of 2004 after completion of due diligence and obtaining the necessary regulatory approvals. About WestSMS Limited WestSMS Limited is a newly developed and leading independent mobile value-added service provider in China. It has a nationwide SMS access number from China Mobile that has over 750 million subscribers. WestSMS has over 1 million monthly registered subscribers on its various value-added services like SMS Chat line, SMS Storage Room, SMS Interactive Games, etc. It is also a SMS Solution Provider for some corporate users like China Eastern Airline. More information on WestSMS can be found at http://www.westsms.com/. About ElephantTalk Elephant Talk Communications, Inc. is a leading telecommunications company established in 1994 with offices located in California, Massachusetts and Hong Kong. The company owns switching facilities in China, Hong Kong and US. ElephantTalk operates international long distance services on both sides of the Pacific to over 220 foreign destinations. They enable telecommunications carriers and other service providers the ability to offer long distance voice, fax, data and VoIP services to their end-customers, through an advanced and scaleable network. More information on ElephantTalk can be found at http://www.elephanttalk.com/. The statements made in this press release, which are not historical facts, contains forward-looking statements concerning potential developments affecting the business, prospects, financial conditions and other aspects of the company to which this release pertains. The actual results of the specific items described in the release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of the release, significant deviations on magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement. For further information, please contact: Pius Lam of Elephant Talk Communications, Inc., (852) 2 707070 3, or fax, (852) 2 707070 7, ; or Lin Xiao Jian of WestSMS Limited, (86) 991 558 3008, or fax, (86) 991 583 2106, . DATASOURCE: Elephant Talk Communications, Inc. CONTACT: Pius Lam of Elephant Talk Communications, Inc., (852) 2 707070 3, or fax, (852) 2 707070 7, ; or Lin Xiao Jian of WestSMS Limited, (86) 991 558 3008, or fax, (86) 991 583 2106, Web site: http://www.westsms.com/ /Web site: http://www.elephanttalk.com/

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