Top Biz News

102 services companies blacklisted

(Reuters)
Updated: 2006-07-18 14:33

China's telecoms regulator has released a list of 102 companies engaged in illegal behaviour in the country's wireless value-added services industry in its latest effort to clean up the unruly sector.

Publication of the list came as one analyst predicted a major retrenchment for the industry, which is likely to contract by up to 30 percent amid the current clean-up.

The new list, whose names include units of software maker Kingsoft and Shanghai Sifang Information Technology, was published on the Ministry of Information Industry's Web site (www.mii.gov.cn) on Monday.

Its publication comes less than two weeks after the nation's top wireless value-added service providers, including Tom Online, Sina Corp., Sohu.com Inc. and Linktone Ltd., were informed of new policies designed to clean up the industry.

Other firms warning of fall-out from the new rules included KongZhong Corp. and Hurray Holding Co. Ltd.

The ministry said in a statement that it had conducted a survey of the industry looking into practices that were harmful to consumers.

It said the 102 companies were found to be engaged in illegal practices have been asked to come into compliance.

"If the companies have not corrected themselves within a set period, they will have their licenses revoked," the MII statement said, without providing specifics on the time period.

The new policies have taken a toll on the stocks of the publicly traded companies affected, with some analysts predicting their revenue from such services could fall by up to 20 percent.

Sina shares are down 10 percent since the changes were announced, Tom Online shares are down 31 percent, and Linktone shares are down 18 percent.

Among the major changes in the original announcement, the companies will be required to offer free one-month trials for their services, and will be required to verify that consumers actually want their services renewed on a regular basis.

Piper Jaffray analyst Safa Rashtchy said the changes will "have a lasting impact" on the industry.

"The most troubling aspect of the new regulations ... is that it points to a lack of quality in the wireless value added services," he said in a research note on Monday.

"As such, we believe the industry has to nearly re-tool itself to produce significantly more useful products and change its marketing methods.

"The result of these changes are likely to be an industry that could be much smaller in size -- perhaps 30 percent or more smaller than the current size, but one that is the more realistic representation of the demand."