China's Internet portals are facing great pressure as SMS usage declines. Cellular operators may also try to renegotiate their revenue-sharing schemes with Web sites.

The NASDAQ-listed Chinese Internet portal Netease.com has reported that its second-quarter wireless revenue will fall up to 40% from the first quarter to 4 million US dollars on weak SMS sales early this month. Other top portals like Sohu.com and Sina.com are also expected to report similar declines.

China has 300 million cost-conscious cellphone users. It is estimated 240 billion short messages were sent off last year, a 170% increase from the year before thanks to its lower rates. A gradual decline in the price of mobile tariffs is another reason. In many parts of the country, mobile tariffs have fallen as low as 0.2 yuan or two cents per minute, hollowing out much of the cost advantage that SMS has enjoyed in the past. Under this new situation, cellular operators may try to renegotiate their revenue-sharing schemes with Web sites. Currently, top cellular operator China Mobile keeps 15% of the revenue from its scheme, leaving 85% to the websites.

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