PCCW ACQUIRES VR-1
February 23, 2001

Pacific Century CyberWorks Japan today announced it has entered into an agreement to acquire the VR-1 Entertainment division of US-based Circadence Corporation in exchange for a private placement of PCCW Japan common stock worth 4.4 billion yen (US$37.9 million).

Established in 1993, VR-1 is one of the world's leading developers of online games. It uses proprietary technology, known as Conductor, to enable massively multi-player games.

Todd Bonner, president and CEO of PCCW Japan said "The acquisition of VR-1 will provide PCCW Japan with technology that will significantly enhance the Jaleco gaming business we acquired in August last year. The combination of our existing and planned stable of games with VR-1 positions us to become a leading global player in network gaming."

PCCW Japan sees huge potential growth in the network gaming area. With the rapid growth of broadband connectivity, the online gaming population is expected to increase from 10 million users today to 70 million, bringing in industry revenues of over US$8 billion in the U.S., Europe, and Japan by 2005 according to AT Kearney.

VR-1 has produced more than a dozen titles and is developing a further five for release over the next two years. Its technology and game designs have been licensed to Hasbro Interactive, British Telecom, France Telecom, Deutsche Telecom, and Samsung SDS.

Microsoft signed with VR-1 to publish and distribute Fighter Ace and has further named VR-1 as a developer for Xbox. Sony has granted VR-1 a license to develop Conductor as a middleware solution for online gaming development on the PlayStation 2.

VR-1 Japan is also using Conductor as a back-end server solution in the development of games to be played over WAP and Java cell phones and other mobile devices. It has 10 wireless games in development. This combined with its B-Factory acquisition in December should strengthen PCCW's mobile focus.