23 December 2004

Value-added wireless service provider Linktone Ltd said it has been penalized by China Mobile for billing clients for services that should have been free of charge.

The Nasdaq-listed company said China Mobile, the country's largest mobile phone operator, will withhold it's wireless access protocol (WAP) revenues for six months starting from Jan 1, 2005.

In addition, China Mobile will suspend approval of any new product applications and joint marketing activities for Linktone's wireless service platforms, including short messaging services, multimedia messaging services, WAP, JAVA, interactive voice response (IVR), and ring-back.

'The inadvertent billing was an unfortunate error,' Linktone chief executive Raymond Yang said in a statement.

'We corrected the root cause of the error and proactively alerted China Mobile as soon as we discovered it internally.

'We are cooperating closely with China Mobile, and we are taking all steps necessary to minimize the impact of the sanctions on our business.'

Linktone said it inadvertently billed about 27,000 WAP customers 6 yuan each for a service that should have been free of charge.

China Mobile also has suspended one of Linktone's IVR services for one month because it contained 'inappropriate content'.

WAP services accounted for 1.8 pct of Linktone's total gross revenue in the third quarter.

Linktone said it will be able to continue offering its existing wireless value- added services through China Mobile's central headquarters and provincial subsidiaries, including current SMS, MMS, WAP, JAVA, IVR, and ring-back product lines.

While the sanctions are not expected to have an impact on fourth quarter gross revenues, they will have a 'moderate' impact next year, the company said.

China Mobile has sanctioned as many as 28 wireless value-added service providers this year, including Sina Corp, Sohu.com and Chinadotcom, for violating their services agreements.

The sanctions are part of a campaign to reform the text messaging market.