Total GAAP revenues grew 214.7% year-over-year to $161.6 million. Total GAAP revenues exclude $11.3 million of revenue from our mobile handset advertising business which is classified as discontinued operation...
GAAP net loss for the first quarter was $53.8 million or $0.42 per fully diluted ADS. The GAAP net loss includes a non-recurring loss of $79.3 million resulting from the restructuring of our mobile handset advertising business.
Focus Media's problems started on March 15 (World Consumer Rights Day), when a Chinese television program exposed the company's practice of sending unlicensed SMS and of sending millions of spam SMS. While the wireless division is essentially out of commission for the near future, the rest of Focus Media's business is going strong. We have long been skeptical of wireless advertising in China, with much of current revenues coming from the waves of spam and illegal text messages.
The recent announcements regarding operator restructuring are a good sign for the future of the sector. We don't expect it to really take off until 3G networks are up and running and at least a few million users are using their new 3G phones for internet browsing and other advanced features. And since that time is in all likelihood at least a year away, Focus Media should have time to rebuild its wireless business around a 3G focus.
Tencent, which has built its QQ instant messaging service into one of China's leading internet companies, recently launched a QQ-branded credit card together with China UnionPay (CUP) and Industrial Bank. Back in 2005, Tencent launched a QQ-branded debit card, but this marks its first foray into credit cards.
QQ users can apply for this card with through their existing QQ account on it or get a new account when applying for the card. The card enables automatic online payment for a variety of products and services and Tencent and other online merchants--no extra trips to the bank needed to "activate" online payment. As might be expected, many Tencent products can be bought at a discount with the card. Users can pay off their bills with any UnionPay bank card online--again, no trips to the bank needed.
Given QQ's relatively young user base, pushing a QQ-themed credit card provides more evidence that the battle for new credit card users is increasingly focused on young users. Just how effective it will be in QQ's hundreds of millions of users into the habit of using a credit card is another question.
As usual, the first speaker was a government guest--this time it was Yu Xiaohui from the MII. He talked about the global growth of VoIP, noting that in March 2008, people spent 100 billion minutes making phone calls on Skype. He also said that according to MII data, most of VoIP users in China are adults--a significantly older user group than in North America and Europe, both of which have younger users on average.
The next speaker was from James Yang from UTStarcom, which grew to prominence supplying much of China's PHS/Xiaolingtong equipment and handsets and is not trying to shift its focus to newer technologies, including VoIP. He discussed the "Telecom 2.0" buzzword and how VoIP fits in. Overall, he described a fairly rosy future for operators and the telecom sector in general.
The most popular speaker of the day was Kan Kaili, a well-known professor at Beijing University of Posts and Telecommunications (BUPT). Professor Kan has a long reputation of publicly and loudly voicing his opinions on telecommunications development in China. Many of his arguments took opposite positions from the previous speakers. Notably, he said he hoped that all the telecom and mobile operators would go bankrupt, and that such an event would "set the industry free" and lead to period of great growth and development.
Here are a few more highlights from Prof. Kan's speech [I quote from memory here]:
There is little difference between telecom operators and thieves...Operators should be like workers building a road--they should build it and then get out of the way. They shouldn't be able to endlessly charge citizens who only want to walk down the road...
The government should not protect operators who engage in this kind of behavior. Doing so will only hinder the development of China's telecom sector...
Ideally, in the future, all the operators' networks will be interconnected, controlled by the government, and free of charge to the citizens....
[Spoken in English, for emphasis!] The Internet should of the people, by the people, and for the people...No company should be able to monopolize it.
As recently reported by Chinatechnews.com , the Chinese central government will finally be re-vamping their telecoms supervisory bureau, the Ministry of Information Industry (or MII), in the second quarter of this year. While preliminary indications are not very clear as to the exact changes regarding the bureau's governing jurisdiction over China's telecoms and internet markets, many of us following the TMT industry will surely be keeping a close watch on this development.
In recent years, China's outdated organization of its industry-specific regulatory bodies have resulted in confusion and power struggles concerning the issues of convergence in telecoms, media, internet, and banking industries in China. A prime example is the on-going battle between the MII and SARFT (State Administration of Radio, Film, and Television) regarding IPTV and DTV services in China, where telecoms and broadcast television converge.
If the Chinese central government can clarify their stance and jurisdiction regarding these coverging industries, that would be great news for all those involved in developing the industry. Even so, we certainly won't be holding our collective breaths for the "new MII" to bring a resolution to these issues regarding industry convergence.
Roaming has been a hot topic in China for the past few months, and just weeks ago the Ministry of Information Industry (MII) and National Development and Reform Commission (NDRC) jointly announced that roaming rates would be lowered starting on March 1. The move came about in large part due to increasing consumer complaints about the high fees for cross-province calls.
We at Maverick China Research are partnering with IIR for the Roaming World Congress 2008, which will be held April 21-24 in Vienna. Click here for more information.
