Mobile Value-Added Services Businesses In China Suffer Setbacks

The last month of 2009 was an example of the problems that mobile companies faced in China during the entire year. In an effort to fight mobile pornography, Chinese telecom operator China Mobile announced that it suspended all of its WAP service partners' ability to charge for services as of November 30, 2009. This applies to all of its WAP wireless value-added service partners in China, regardless of a partner's propensity to disseminate pornography. Investors in Chinese companies like Linktone, KongZhong, and Hurray should be worried. Then a couple days later, Linktone announced its unaudited financial results for the third quarter ended September 30, 2009, and stated it had recorded poor wireless value-added services and other revenues of USD13.8 million, compared with USD18.3 million in the second quarter of 2009 and USD16.6 million in the third quarter of 2008. Then KongZhong Corporation became the first U.S.-listed mobile firm from China to admit that the expected downturn caused by the WAP suspension of telecommunications billing would adversely affect its bottom line. Then Hurray finally announced its quarterly earnings, and it too showed a dismal wireless outlook. Hurray's total revenues for the third quarter ended September 30, 2009, were USD6.9 million, representing a decrease of 2.9 million quarter-over-quarter and a decrease of 6.6 million year-over-year! Then, to prove that even the big boys have tough times, Zhang Chunjiang was removed from his positions at China Mobile due to alleged serious financial irregularities.