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Rumor: China Mobile to End 12580 Contract with Wuxian Xunqi

New Century Weekly, 7/11/11

Beijing-based Wuxian Xunqi Information Technology's contract to operate China Mobile's (NYSE: CHL; 0941.HK) 12580 information services platform will reportedly expire at the end of the year. According to an industry source, the two companies will move from a revenue share model to a flat fee model this year, but Wuxian Xunqi will continue to receive a revenue share from mobile paper subscriber and advertising fees.

When China Mobile launched 12580 in 2007 as a counter to China Telecom's (NYSE: CHA; 0728.HK) 114 information hotline, the operator chose Wuxian Xunqi to oversee the operation of the service, making Wuxian Xunqi one of few service providers (SPs) to directly contract with the operator's mobile data division, while the majority of SPs partnered with China Mobile subsidiary ASPire Information Technologies. 12580 services include voice search, business travel booking services, mobile traffic violation inquiry services, and mobile weather forecasts. China Mobile currently splits service charges evenly with Wuxian Xunqi. Shared revenues from 12580 accounted for the majority of Wuxian Xunqi's revenues for the first two years of its agreement with China Mobile, with ad revenues gradually increasing. Ad revenues derive from referral fees when callers are transferred to businesses through 12580; these account for roughly half of all revenues for 12580 at present.

As a partner of China Mobile, Wuxian Xunqi is able to offer its "Life Update" mobile paper services -- MMS messages containing finance, fashion, automotive, or health news -- without having to pay the operator MMS fees. (China Mobile generally charges RMB 1 per message for small-volume senders, RMB 0.5 per message for large-volume senders, and RMB 0.3 per message for senders with whom it has an especially close relationship.) A source inside Wuxian Xunqi said that the company had several tens of millions of users of its "Life Updates" service in Beijing, Shanghai, Guangzhou, Jiangsu, Zhejiang, and Sichuan, with all service revenues going straight to Wuxian Xunqi. Ad revenues from the service exceeded RMB 100 mln last year.

China Mobile requires all mobile newspaper services to go through ASPire, but the restriction does not apply to "Life Updates."

Wuxian Xunqi currently employs more than 300 people. According to annual inspections of the company, Wuxian Xunqi had losses of more than RMB 20 mln in 2007 and 2008. In 2009, the company had profits of RMB 52.98 mln on net revenues of approximately RMB 360 mln, and of RMB 70.1 mln on RMB 447 mln in 2010.

Keywords: mobile advertising HR China Mobile mobile data revenue wireless MMS Wuxian Xunqi Aspire CHL revenue share voice search 0941.HK 12580 mobile paper profit WVAS tariffs SP

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