China Mobile suspends Sohu.com as supplier | HT Tech

China Mobile suspends Sohu.com as supplier

Sohu.com said China Mobile had suspended it as a supplier of mobile phone picture services for one year for unsolicited marketing to some customers.

By: REUTERS
| Updated on: Aug 14 2004, 11:57 IST

Chinese Internet company Sohu.com on Friday said China Mobile had suspended Sohu as a supplier of mobile phone picture services for one year for unsolicited marketing to some customers.

The move is part of a crackdown by the state-controlled mobile phone company which is seeking to rein in aggressive marketing of mobile phone services across China, the world's largest wireless market.

Earlier this week, rival Sina Corp said China Mobile had temporarily suspended its interactive voice response service after Sina offered a toll-free phone sex service to mobile phone users with the system.

'We believe that China Mobile's iron-fisted response is aimed at sending the sector a message: Clean up your act,' Think Equity financial analyst Jason Tsai said in a note to investors after Sohu said it also faced a suspension.

Shares of the Beijing-based company, which had been halted for trading on US markets ahead of the news, tumbled as much as 17 per cent once the stock reopened on the Nasdaq. Shares of four competitors fell by between six per cent and nine per cent.

Sohu said China Mobile Communication Corp was punishing it for a June 17 incident in Sichuan province in which Sohu sent out 1,374 solicitations for its 'I WANT PHOTO' picture messaging service to customers without China Mobile's prior approval. The suspension takes effect on September 1.

'This is a devastating blow to Sohu,' Tsai said, arguing Sohu was counting on photo messaging to shore up rapidly falling sales from text-messaging services.

Mobile messages are one of the two main contributors to Sohu revenue. It also sells online advertising on a network of Chinese Internet sites, which account for half of the company's total revenue.

Photo messaging services generated 15 per cent of Sohu's second-quarter wireless revenue. Tsai had estimated that this would grow to nearly 30 per cent of mobile sales next year.

Sohu said in a statement its affiliated Beijing Sohu Online Information Services Co Ltd was one of four service providers who were being punished by China Mobile. it did not name the other concerns.

'Sohu's application for (China Mobile's) potential new business will also be temporarily suspended,' during the time its messaging service is suspended, the company said. China Mobile asked Sohu to pay damages of one Chinese yuan per user.

At the start of this month, China Mobile cut the maximum fee Sohu and other service providers could charge its customers per month in half, to 15 renminbi from 30 renminbi. Individual message costs were also cut in half to one renminbi from two. One renminbi is equal to 12 US cents.

The one-year suspension and the recent move by China Mobile to cut billing rates for messaging services provided by Sohu and others will hurt Sohu's third-quarter revenue and profit, Chairman and Chief Executive Charles Zhang said.

He said third-quarter revenue would be cut by between $1.5 million and $1.8 million, and net profits would fall by between $1.0 million and $1.3 million. In late July, Sohu had forecast revenue of between $28.1 million and $29.1 million.

Shares of Sohu ended the day down 10.6 per cent at $14.92 on Nasdaq. Sina.com shares dropped as much as nine per cent during the day and ended down 6.7 per cent at $19.78 on the Nasdaq market, where it was the eighth most actively traded issue on Friday.

Netease.com fell four per cent, and Linktone Ltd gave back 5.8 per cent. Chinadotcom ended down nearly two per cent. All five stocks are listed on Nasdaq.

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First Published Date: 14 Aug, 11:57 IST
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