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SMS service increases Linktone's revenues
By Liu Baijia (China Daily)
Updated: 2004-08-06 09:35

Chinese wireless value-added service provider Linktone Ltd yesterday reported strong second quarter results due to the sustained growth of short messaging service (SMS) and other value-added services.

The revenues of the NASDAQ-listed firm reached US$12.1 million in the second quarter, compared with US$3.3 million in the same period last year and US$9.4 million in the previous quarter.

Profits were US$3.5 million, or 13 US cents per diluted American depository share (ADS), contrasted to net profits of US$800,000 and earnings per ADS of 3 US cents a year ago.

"We are very pleased with the second-quarter results and our sustained revenues and earning momentum," said Raymond Yang, chief executive officer of the Shanghai-based company.

However, the price of the company's ADS fell almost 15 per cent in the after-hours trading on the NASDAQ to US$10.25, which was mainly due to its earnings per ADS being short of an estimated 14 US cents polled by the Thomson First Call.

Linktone, which relies heavily on SMS, achieved 19 per cent quarter-on-quarter growth to US$11 million, while most of its competitors reported declines.

Netease.com Inc, another NASDAQ-listed Chinese company, had a 37 per cent quarter-on-quarter decline in its wireless services, mainly composed of SMS.

The declines were mainly due to tightening regulations from the Chinese Government and intensifying competition.

Yang attributed Linktone's growth in SMS to expanded sales network, diversified marketing channels and enriched content.

He said the company got 50 per cent of its revenues from the second-tier market, increasing 43 per cent quarter-on-quarter.

Another boost for Linktone in the text message business was the revenues from the country's second largest mobile operator China Unicom accounting for 13 per cent in the second quarter, from the 12 per cent in the January-March period, while most of its rivals were focused on China Mobile, the dominant Chinese mobile operator.

Jim Sun, an analyst with Shanghai-based Evolution Securities China Ltd, says he believed that the high percentage of active subscribers was a major factor in Linktone suffering less from new regulatory measures, while many service providers have a large portion of inactive users.

He pointed out that a big local sales network was another factor in the company's growth.

Linktone has more than 100 marketing people to co-ordinate co-operation with mobile operators.

Besides, 2.5G services including multimedia messaging service, wireless application protocol, and Java downloads, as well as voice-based services such as ring-back services and interactive voice response service, also had sharp increases.

The revenues from these services accounted for 9 per cent of Linktone's total in the second quarter, up from the 1 per cent in the first quarter.

However, Sun said he believed that Linktone still needed to make more effort with new services to offset the slowdown of SMS, as competitors such as Tom Online and Sina Corp had already made significant progress.

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