Analysys International, a leading Internet based provider of business information about technology, media and telecom (TMT) industries in China, says in its recently released report "China's MVAS-JAVA Service Market Quarterly Tracker Q2 2006", that China Mobile's information fee of JAVA services before revenue sharing settlement reached RMB 140 million in Q2 2006 with an increase of 17% over Q1 2006.

Just like the WAP services, JAVA services, influenced by China Mobile's movement in cracking down the self-consumption phenomenon, the growth rate slowed down. However, the revenue share from self-consumption of JAVA services in the second quarter of 2006 still maintained as high a level as 60%. That left little profit margins for the SPs. Even China Mobile had not started the cracking movement; the only result from the rampancy of self-consumption will be crush and perdition.

In this quarter, SPs' breach of regulations in Baibaoxiang services obviously increased. Under the increasingly severe regulations and policies of China Mobile, many SPs still risked danger in desperation. They set various fraudulent traps for users to snatch their money. Breach actionssuch as bundling and self-consumption have been used more frequently than before. Under the macro background of China Mobile's movement of cracking down on self-consumption in June 2006, the information fees before revenue sharing settlement of Baibaoxiang services still went up against the situation and reached RMB 54.11 million, which showed a sharp increase of 21% over the RMB 44.64 million of May 2006.

Analysys International had pointed out that the simplex marketing promotion channel (position) is the major reason to result in the self- consumption phenomenon. Meanwhile, self-consumption disturbs the normal market competition landscape. As self-consumption can bring huge revenue in the short term and change the rankings, the SP competition landscape always falls into turbulence, and the changes cannot reflect the genuine product and marketing strength.

"Unfortunately, this condition has not been improved in the second quarter 2006. The regulations from China Mobile tightened, and the environment of SPs continues deteriorating. The worse competition environment increased the possibilities of SPs to take up breach actions including self- consumption, while the breach actions induce to severer regulations from the carrier. And this creates a vicious circle," says Jin Hui, an analyst from Analysys International, "The continuity of this situation is very harmful to the long-term healthy development of JAVA services. The carrier should adopt practical methods to expand the SPs' marketing channels and solve the problem from the root while cracking down on the self-consumption and rectifying the SPs' fraud actions."

This subject is further discussed in Analysys International's research report "China's MVAS-JAVA Service Market Quarterly Tracker Q2 2006." For more information, please check the website: http://english.analysys.com.cn