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June 1, 2011 4:14 am

Yahoo plans mobile phones push

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Yahoo, the US search engine, and MediaTek, one of the leading suppliers of microchips for mobile phones, have unveiled a partnership to give traditional mobile phones capabilities similar to those of smartphones.

Under the partnership, announced on Wednesday, MediaTek will integrate Yahoo’s web offerings, such as instant messaging, e-mail, and the Flickr photo service, into Mediatek’s chip packages that largely go into regular mobile phones sold in China and other emerging markets.

Tsai Ming-kai, chairman of MediaTek, said the partnership would broaden access to “services that were previously only available on full smartphones – particularly in markets such as Vietnam, Malaysia, Indonesia, the Philippines and India”.

This could bring mobile internet to large parts of the world’s population where there are no third-generation mobile networks and where lower income levels mean few can afford mainstream smartphones such as Apple’s iPhone.

By boosting the capabilities of Chinese-made phones, it will also pose an additional challenge to Nokia, who on Tuesday issued a profit warning for the second quarter partly because of weak sales in China.

Smartphones have grabbed worldwide attention as the most rapidly growing segment of the mobile market, but they still accounted for just a fifth of the 1.6bn mobile devices sold last year, according to Gartner technology research.

The innovation is made possible by new software developed by the Taiwanese company Maui Runtime Environment that lets traditional feature phones download and run applications much like a smartphone does.

The partnership gives Yahoo a new foothold in the mobile internet market, where Microsoft and Google are battling over the smartphone segment with rival operating systems.

While no financial details were disclosed, analysts said it was highly unlikely that Yahoo would receive any direct revenue from having its services installed on MediaTek-powered phones. Instead, the partnership would greatly expand Yahoo’s user base in emerging markets, giving it more opportunities to sell advertising.

CK Cheng, a CLSA analyst, said: “If they are already in the phones, then it would be much easier for them to push ads across to those users”.

Mr Tsai said the partnership allowed MediaTek “to provide a value-added mobile platform solution like no other to handset brands, and adds prestige to the handsets”.

The company’s pricing power has fallen because of competition from the likes of China’s Spreadtrum and Taiwan’s Mstar.

Mediatek’s revenues in the first quarter of this year fell 40 per cent from a year ago to T$20bn ($700m), while net profit margins halved over that period to 16 per cent.

Randy Abrams, an analyst at Credit Suisse, said the deal could create some differentiation for Mediatek’s platform, but it remained to be seen whether any exclusivity was tied to the deal or if its rival suppliers would also strike similar content arrangements.

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