ZST Digital Networks has announced that it has entered into an agreement with the Road Transportation Department of Shangqiu City, a city with over eight million residents in eastern Henan Province, to develop a city-wide GPS tracking platform for commercial vehicles.

Under the terms of the agreement, ZST Digital will plan, design and implement a city-wide GPS tracking platform primarily for use by commercial vehicle fleets operating in Shangqiu City, including trucks, freight vehicles, taxis, tour buses, minibuses and vehicles for the transport of hazardous materials.

The platform will utilize ZST Digital's commercial GPS tracking technology and will link registered vehicles to the national and provincial transportation departments. In addition, ZST Digital will provide ongoing maintenance and support of the platform.

Upon completion of the project, commercial fleets operating within Shangqiu City will be required to register their vehicles on the GPS platform, but will have the option to choose from various GPS equipment and service providers to provide the vehicle-installed GPS units.

However, as part of the agreement with Shangqiu City, ZST Digital will be designated as the "preferred vendor" for GPS products and services by the Shangqiu City Road Transportation Department.

ZST Digital will be responsible for the initial platform design, hardware and installation costs, and will receive ongoing service and maintenance fees, in line with its existing contracts, from commercial enterprises that select ZST Digital as their GPS tracking and services provider. The Company has already begun construction of the platform and expects to complete the project within 30 to 60 days.

Management estimates the total investment in the project will amount to RMB2.0 million (approximately US$0.3 million) (1). The Company believes that the agreement could generate approximately RMB40-50 million (approximately US$6.1-7.6 million) in revenue per year upon successful completion of the platform, and it expects to begin generating revenue from this project in the second quarter of fiscal 2011.

Commenting on the news, Mr. Zhong Bo, the Company's Chairman and CEO, said, "This agreement marks a major milestone in the development of our commercial GPS offering and highlights the strong demand for GPS products and services in Henan Province. There are currently over 60,000 commercial vehicles operating in Shangqiu City, with an average yearly growth rate of approximately 6%. The signing of this agreement and our designation as the preferred GPS products and services provider by the Shangqiu City Road Transportation Department will help to increase the pace of our GPS products and services rollout. While the implementation of the city-wide platform will require us to make an upfront capital investment, it will significantly expand our base of potential customers. In fact, we believe this agreement could increase our commercial GPS customer base in Shangqiu City to approximately 30,000 - 50,000 vehicles within one year, which translates to roughly RMB40.0 million - RMB50.0 million (approximately US$6.1 - 7.6 million) in yearly revenue.

"We are pleased with the rapid progress that we have made to date on our commercial GPS offering, and we will continue to seek additional opportunities to expand our customer base and further promote the benefits of our GPS tracking products and services in Henan Province."