China's top mobile carrier, China Mobile (Hong Kong) Ltd, has launched a revenue sharing system for its mobile messaging service partners on July 06, as it tries to carve out a bigger piece of the pie for itself.
Under one arrangement in the new three-tiered system, China Mobile will retain 15 percent of revenue for mobile messaging service providers that do all their own marketing and customer support, with the remainder going to service providers, according to a note released on July 06 by JP Morgan.
Such services vary widely, from ring tone downloads to the providing of online games and dating services.
The 85-15 split with service providers like Sina Corp, Sohu.com Inc. and Tom Online Inc., parallels a previous system in place before an industry cleanup that began more than a year ago.
In addition to the 85-15 split, China Mobile, which commands about two-thirds of China's mobile market, has also introduced two other tiers of billing, according to the JP Morgan note, citing information given at an analysts' meeting on July 05.
One of the other tiers will see China Mobile retain 30 percent of revenue when it provides customer service for mobile messaging services offered by third parties.
The split could go as high as 50-50 in the third tier of sharing if China Mobile also provides marketing services.
Analysts said China Mobile had probably been testing out the three-tiered system on a trial basis for several months, but the presentation this week marked a formalisation of the structure.
"We are encouraged to see China Mobile...meeting directly with investors and analysts and making its policies more transparent," JP Morgan analyst Dick Wei wrote in a note.
He added that the new billing system, coupled with China Mobile's indications that it would be willing to work directly with content providers on its own mobile messaging service offerings, could turn up the heat on independent service providers like Sina and Sohu. "We believe this will put more pressure on the service providers' growth in the future," he wrote.
Sina, Sohu and their peers have been scrambling to diversify away from mobile-related services - which previously accounted for a majority of their revenue - following the Beijing-led campaign targeted at cleaning up controversial content like spam and pornography.
As a case in point, Sohu saw mobile messaging revenue account for less than 30 percent of its total in the first quarter of this year, well below the more than half of revenues before the crackdown began.
In place of mobile messaging, companies like Sina and Sohu are trying to build up other areas like online games and Internet search services.
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