Stephen Chow is happy these days. His latest film, "Kung Fu Hustle," has become a box office hit on the Chinese mainland.

Within days of its mainland release, the film, starring and directed by Chow, has earned more than 100 million yuan (US$12 million). It opened on December 23.

Zhou Yunfan is also happy with the film's success. His company, Kongzhong Corp, was the sole provider of wireless value-added services related to the movie.

Now, Kongzhong Corp is considering using the film's popularity to promote its mobile gaming business.

The firm spent 1 million yuan (US$120,000) to secure the official mobile value-added service sponsorship for the movie. Kongzhong Corp is expected to spend another 1 million yuan on related product development, advertising and promotions.

And why not? Kongzhong Corp, the biggest mobile game operator in China, will release a "Kung Fu" mobile game within the month.

"Kung Fu Hustle is a hot topic among Chinese, and we want to use the sponsorship ... for our new mobile marketing team," Zhou, chief executive officer (CEO) of Kongzhong said during an interview last week.

Kongzhong has hired Qi Hai as a senior vice-presiden, who was from ASPire Technologies - a joint venture by the country's biggest mobile operator, China Mobile, and Vodafone, HP and Merril Lynch - to head its marketing team.

Kongzhong, which is listed on the NASDAQ, has made the development of mobile games one of its top priorities. However, its revenues are derived mainly from multimedia messaging (MMS), wireless access protocol (WAP) and Java technology.

About 11 per cent of the firm's US$12.36 million in revenues in the third quarter were derived from mobile gaming.

"Mobile games were introduced last year, and we expect significant progress in 2005," Zhou said.

Kongzhong Corp offers about 300 games on different phone models.

Beijing-based market research house Analysys, in a report last year, predicted China's mobile gaming market would reach 600 million yuan (US$72.46 million) in 2004.

The report rated Kongzhong No 1 in WAP and JAVA games. The firm held about 15 per cent of the market in last year's first quarter.

WAP games must be played on a mobile network, while Java games must be downloaded but need not be played online.

Eagle Zhang, general manager of consultancy Analysys, suggested pushes by China Mobile and China Unicom, the enriched functions of mobile phones, and people's interest in gaming are the major reasons for the increasing popularity of mobile gaming.

A player, known only as Sword, of Kongzhong's popular WAP game "China Treasure Hunting" has spent up to 30,000 yuan (US$3,600) on data transmission fees to China Mobile over the past two years. He also broke two phones.

The mobile gaming market's rosy prospects have also attracted many other players.

China's biggest online game operator, Shanda Interactive Entertainment, announced last September it intended to acquire Beijing Digital-Red Mobile Software Co Ltd, the mobile game developer that developed games for phone giants such as Nokia, Motorola and Sony-Ericsson.

Shanda's chairman and CEO Chen Tianqiao said last Friday his company plans to extend its advantage in online gaming to the mobile and TV platforms.

The acquisition of Digital-Red laid the foundation for the firm's future expansion, he added.

Zhou said the lack of a common standard for mobile phones remains his firm's biggest headache.

Game operators still have to send representatives to discuss embedding their games in the phones, or to test the phones.

Zhang said there has been little progress, in the past two years, in resolving such issues.

He suggested mobile carriers should be more aggressive and ask phone makers to meet the same specifications.

Both China Mobile and China Unicom have procured hundreds of thousands of mobile phones, and have required the phone makers to embed their services into phones.

Compared with the more than 300 million mobile subscribers in China, the proportion remains small.

Chen suggested the slow transmission speed of current mobile networks is another restriction.

However, he said the business might witness explosive growth this year and next, as the Chinese Government is expected to release licences for the third-generation (3G) mobile communications systems, which will be capable of transmitting more than 380 kilobits per second.

Zhou agreed the launch of the 3G networks will boost mobile gaming, as mobile operators will require more advanced mobile applications to attract subscribers.

Kongzhong Corp has more than 200 people working on game business.

Zhou said his company has been focused on operations and profits, and will pay greater attention to mergers and acquisitions this year.

(Business Weekly 01/13/2005 page15)