Chinese wireless value-services provider KongZhong (KONG) has reported its unaudited third quarter 2007 financial results.

Total WVAS revenues for the third quarter were US$16.82 million, remaining flat sequentially. Revenues from 2.5G services accounted for approximately 33% of total WVAS revenues and revenues from 2G services represented the remaining 67%. The WVAS cost of revenues in the third quarter of 2007 totaled US$8.01 million, a decrease of 6% sequentially. WVAS gross margin in the third quarter of 2007 increased to 52% compared to 49% in the second quarter of 2007.

The aggregate revenues from China Unicom, China Telecom and China Netcom accounted for approximately 25% of the total third quarter WVAS revenues, while revenues from China Mobile accounted for the remaining 75%. The company says this was consistent with the relative market positions of the four major telecommunications operators in the Chinese mobile industry.

Total WVAS operating expenses in the third quarter of 2007 were US$6.58 million, an increase of 1% sequentially. Product development expenses decreased by 5% sequentially and represented 13% of revenues. Sales and marketing expenses increased by 29% sequentially and represented 18% of revenues, mainly due to increased sales and promotion activities. General and administrative expenses decreased by 25% sequentially and represented 9% of revenues, mainly due to the Company's cost-controlling efforts.

Total mobile advertising revenues, which were mainly generated from KongZhong's wireless Internet portal Kong.net, increased 19% sequentially to US$265,000 in the third quarter of 2007. Operating expenses related to the company's wireless Internet sites were US$2.6 million, which included US$1.49 million in marketing and advertising expenses.

US GAAP net income totaled US$0.54 million in the third quarter of 2007. Diluted US GAAP earnings per ADS were US$0.02 for the third quarter.

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