Optical/IP Networks

ChinaWatch: Crunch Time!

The prospects for growth in China are fueling many an ambition in the mobile technology world, but while the advent of 3G will bring benefits to some, there are also signs that macro economic conditions are affecting sales and strategic decisions.

Mobile VAS specialists struggle
Financial results from two of China’s leading mobile value-added services (VAS) companies, Jingwei International Ltd. (Nasdaq: JNGW) and Hurray! Holding Co. Ltd. (Nasdaq: HRAY), suggest the economic slowdown is hitting consumer spending.

Jingwei, which offers integrated marketing services including mobile marketing, has issued a profit warning for the fourth quarter of 2008. The Shenzhen-based company noted that "due to rapid deterioration in economic condition at the end of 2008," it's expecting to report a year-on-year decline in consolidated net profit for the three months ended December 31, 2008.

In a company statement, CFO John Bi noted that the "decline in revenues and profits was primarily attributable to delayed execution of contracts from our clients as a result of economic downturn." He also noted that "Jingwei is confident about its continued growth, with opportunities expected from 3G deployment and the stimulus measures being implemented by the government in China." (See China's 3G Move to Trigger Spending, Global Capex Set for 2010 Rebound, and Top 10 Telecom Markets: Asia.)

In the fourth quarter of 2007, Jingwei reported revenues of $7.9 million and net income of $3.2 million.

Hurray!, which provides music! and music-related products! such as ringtones, ringbacks, and truetones, has released fourth-quarter results below expectations. The company generated revenues of $14.4 million, down more than 9 percent from a year earlier, and reported a net loss of $9.2 million. That loss included a $1 million goodwill impairment charge and a $4.5 million foreign exchange loss on its currency holdings.

For the full year 2008, revenues were down nearly 11 percent at $54 million, but its net loss of $12 million was significantly better than 2007's loss of $42 million.

Unicom confirms iPhone talks
China Unicom Ltd. (NYSE: CHU) chairman Chang Xiaobing has confirmed the operator is in talks with Apple Inc. (Nasdaq: AAPL) about offering the iPhone to its early 3G customers, according to this Interfax China report.

An announcement about the outcome of the talks is expected be made on May 17, when Unicom is expected to launch commercial 3G services on its new WCDMA network. (See Nokia Siemens Scores China 3G Deals and China Awards 3G Licenses.)

The iPhone’s entry into China is an on-going saga. Negotiations between Apple and China Mobile Ltd. (NYSE: CHL) concerning the 2G version of the popular device broke down about a year ago over revenue-sharing issues and Apple's control over its applications store.

China Mobile has reportedly stated that it's still in talks with Apple about a 3G device to run on its new network, but that would need to be a TD-SCDMA version of the device, something that doesn't currently exist. (See China Mobile Preps 3G Surge.)

— Catherine Haslam, Asia Editor, Light Reading

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