Business, Telecom & Wireless

Nokia, Pearson: Foreign Companies Running Blindly Into China's Wireless Internet Sector

Just weeks after China's largest telecommunications operator halted paying firms for some wireless services, two foreign companies now ironically plan to join forces to push educational services to China's mobile phone citizenry.

Ever-bullish Nokia is working with education publisher Pearson to form a joint venture called Beijing Mobiledu Technologies. The new company will focus on developing Nokia's Mobiledu business. Launched in China in 2007, Mobiledu is a mobile service that provides English-language learning materials and other educational content, from a variety of content providers, directly to mobile phones. Customers can access the content through an application preloaded on new Nokia handsets, or by visiting the service's mobile website and other WAP portals in China.

Since its launch, Mobiledu has already reportedly attracted 20 million subscribers in China, with 1.5 million people actively using the service each month. Mobiledu will continue to be delivered to customers in China through a range of channels, including Nokia's Ovi Store.

However, the joint venture may be doomed to fail, since late last year China Mobile halted all payments to WAP service providers. On November 30, 2009, in order to support the Chinese government's efforts to maintain an orderly mobile Internet environment, China Mobile implemented a series of measures targeted at eliminating offensive or unauthorized content, including pornographic content, on Chinese-based wireless application protocol sites. As a result, China Mobile and other Chinese telecommunications operators have suspended billing their customers for all WAP and G+ mobile gaming platform services, including those services that do not contain offensive or unauthorized content, on behalf of third party service providers of such services. China Mobile and other operators have not yet indicated how long its new measures would last or whether it would expand its current measures.

Earlier today, one of China's largest Internet portals, Sohu.com, reported its earnings for the last quarter of 2009. Sohu.com's wireless revenues for the fourth quarter of 2009 were USD15.7 million, representing a decrease of 7% sequentially. The company explicitly stated in its press release, "The quarter-over-quarter decrease was mainly attributable to China Mobile discontinuing the billing for WAP services in late November."

And back in December 2009, Chinese wireless value-added services firm KongZhong stated that it expects the measures will impact KongZhong's WAP and wireless Internet services and a portion of the company's mobile game services, as well as the revenues derived from such services. Based on the company's current assessment at the time of these measures, KongZhong expected its revenues in the fourth quarter of 2009 to be within the range of USD34.0 million to USD35.0 million, as compared to its previous guidance range of USD37.0 million to USD38.0 million.

KongZhong then issued a statement last week that stated over the course of the next few weeks and under the guidance of China Mobile, wireless value added services that are embedded in handsets will be required to introduce additional notices and confirmations to end-consumers during the purchase of such services. Similarly, over the course of the next few weeks, services related to SMS short codes will be required to be more tailored to the specific service offering or service partner. Previously, a single SMS code could be used for multiple service offerings or partners.

These consumer-friendly rules will hurt wireless value-added services providers as they make additional hurdles for consumers to subscribe to applications and services in China.

3 Comments

  1. Granted, I'm sure Nokia and Pearson are much smarter than you assume and they have taken into account all these risks. Foreign companies are not idiotic like you are making them out to be! Are you shorting their stocks?

  2. Interesting article, but as presented, you arn't making sense.

    First, let's be clear that it isn't just "Foreign Companies Running Blindly" into a market where they expect WAP services to be billed. China's own indigenous companies expect the same – as you can find in the same press releases from Kong and Sina that you reference.

    The simple point is that currently mobile internet has lost the major billing channels that are in place due to government restrictions which all players are expecting to be restored in the short term.

    If mobile billing either through WAP or SMS is not restored, then ALL players in China will have to find other alternatives not just the foreigners.

  3. Mike: you have never worked in the MVAS sector in China because if you did you would know that these MVAS players never really had any billing channels to begin with and China Mobile has always been top player in this market. All these companies were previously making their money on pornography on mobile phones and now that is illegal as it should be in PRC and elsewhere in the world. THANKS~SHEL

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