Linktone takes major revenue hit

China's market for services delivered to mobile phones is in turmoil

One of China's leading providers of entertainment and information services to mobile phone users suffered a sharp fall in revenue and profits during 2007.

Gross revenue at Linktone fell 31 per cent to $51m during the year. The company endured a net loss of $16.4m, more than double the previous year's net profit, after a $5.1m fall in the value of investment assets.

Linktone executives predict future market opportunities from the long-delayed introduction of 3G mobile networks to China, however.

The company is one of several badly hit by turmoil in China's market for various information and entertainment services delivered to mobile phones known as wide area value added services (WVAS).

Problems began when the government cracked down on inflated end-user charges in 2006. Service providers also had to adjust to new rules which made it harder to sign customers for services.

They also faced growing pressure from China Mobile, the world's largest mobile phone firm by subscriber numbers. China Mobile owns the networks over which the WVAS providers operate, and is free to compete with them if it wishes.

As Linktone sought capital to reduce debts last year, the firm agreed to let an Indonesian media and communications investment firm, Media Nusantara Citra, take up a 51 per cent stake.

Earlier debt reduction efforts had proved largely unsuccessful. "We took some definitive steps earlier in the year to help better position the company for longer-term growth," said chief executive Michael Li.

"With the pending Media Nusantara Citra investment and subsequent cash infusion, we will be able to aggressively implement our cross media strategy in China, which will become our core platform.

"We anticipate that Media Nusantara Citra's existing expertise in the WVAS market will also enable us to access and become an established player in other Southeast Asian markets.

"We believe this partnership will yield tangible synergies for both sides, allowing each company to pursue numerous advertising and cross selling initiatives."