Tom Online retreats from mobile services market

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Chinese firm may go private after impact of new regulations.

Tom Online retreats from mobile services market
Trading of shares in Tom Online has been suspended as its parent attempts to take the leading China mobile services firm private, the company said yesterday. 

In common with other providers of mobile entertainment and messaging services in China, Tom Online has seen its profits and revenues slump following the introduction of tough new regulations.

Tom Online's parent company, privately held Tom Group, will have to pay well in excess of US$210m to buy the 44 percent of shares it does not own, assuming that the shares rise to a premium on their current price.

Tom Group is expected to merge Tom Online back into the core group to cut costs, analysts told Hong Kong newspapers.

Tom Online offers a variety of mobile services, including games, ring-tones, messaging and social networking.

Following the Chinese government's introduction of new regulations controlling mobile services, the market suffered a sharp downturn from which it has not yet recovered.

Tom Online's net profits fell almost 60 percent in the third quarter of 2006 to US$39m, down 15 percent year on year. Other firms have suffered, including the UK's MonsterMob.

The new rules force providers to seek clear confirmation from subscribers who were signed up for new services, and introduced much stricter control of usage charges.

Thousands of customers had complained that they had unwittingly signed up for mobile services, and were shocked to discover hefty recurring charges on their mobile phone bills.

Some customers alleged that they had never opted in to the services, but were still charged for them.

Tom Online is listed on the Hong Kong Growth Enterprise Market, and its depository receipts are traded on the US Nasdaq exchange.

The Tom Group was established in 2000 by Hong Kong's richest man, Li Ka-Hsing.
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