China Mobile Plans Ringback Tone Advertising

China Business Post, 3/20/08

A source close to China Mobile (NYSE: CHL; 0941.HK) has revealed that the company is pushing forward with preparations for advertising color ringback tones (CRBT), with commercial use possible by H2 2008.

Mobile users will be able to download advertising CRBTs at no charge, with advertisers covering download costs and paying a fee to the operators. The actual costs to advertisers are currently under discussion.

Mobile users may also receive payments, possibly in the form of rebates on their mobile phone bills, determined by the number of calls they receive in a month. Again, figures are under discussion.

However, currently operator platforms do not support advertising CRBTs, so the technical issues involved in an upgrade will need to be discussed with the vendors. These platforms are mainly sourced from Huawei and ZTE (0763.HK; 000063.SZ), with Huawei already having expressed enthusiasm for advertising CRBTs and proposing a 'Huawei model.'

Under this model, Huawei would collect music from advertisers and upload it to the operator's Huawei-provided platform. Promotion would then be handed to leading wireless value-added service providers (SPs) or other channels. At the end of last year Huawei's China Commercial Consulting department started talks on close partnerships with SPs including Kongzhong (Nasdaq: KONG), Tom Online and A8.

If this goes ahead, Huawei will become the leader of the advertising CRBT business, collecting fees from advertisers and passing a cut on to operators.

However, China Mobile has objections to this model.

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