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Rumor: Focus Wireless Will Disband, Dismiss Chinese Employees

Chinese media has more rumors that Focus Wireless, a subsidiary of Focus Media (FMCN), will soon disband and dismiss most of its employees as a result of the wireless spam incident in March this year.

The rumors state that most of the employees of Focus Wireless will be dismissed and these employees will be compensated, while just a few of them will be sent to work at Focus Media. So far, Focus Media has not made any comment on the disbanding of Focus Wireless.

Focus Wireless has been asked to stop and rectify its wireless business followed a broadcast of CCTV's 2008 March 15 World Consumer Rights Day program which exposed Focus Wireless as an SMS spam creator. A few days ago, Tan Zhi, CEO of Focus Media, announced that the reorganization of Focus Wireless is almost done, so this has caused more heated debate about the subsidiary's future.

In March 2006, Focus Media acquired Chinese domestic mobile phone advertising operator Kaiwei Diangao for USD30 million and began to implement its wireless strategy. In June 2006, Focus Media established Focus Wireless to specially engage in mobile phone WAP site advertising, SMS and MMS advertising, wireless IM and wireless interactive marketing. By the end of 2007, Focus Wireless already took about 50.6% of China's wireless advertising market. However, followed a broadcast of CCTV's 2008 March 15 World Consumer Rights Day program, Focus Wireless' position as an SMS spam creator put it and its parent company Focus Media as a hot topic across China. Suspected of being involved in sending unlicensed short messages, Focus Wireless' SMS channel was shut down by operators.

However the disbanding of the unit probably is not related to the CCTV incident surrounding sending of spam messages. Instead, Focus Wireless is probably finding that, like competitors Hurray, KongZhong, and Linktone, the wireless value-added services sector in China is incredibly difficult to penetrate. KongZhong says its unaudited first quarter 2008 financial results reveal total revenues increased 8% sequentially to US$21.39 million, but total mobile advertising revenues were a weak US$212,000. Last week, Hurray announced that Sean Wang, the company's president, COO, and acting CFO, left the company on June 20, 2008. A few weeks ago, Hurray unveiled its poor unaudited financial results for the first quarter ended March 31, 2008 and said its total revenues hit USD13.2 million, representing a decline of 16.7% quarter-over-quarter and 19.5% year-over-year.

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