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Last updated: July 10, 2006 10:39 am

Monstermob hit by new China rules

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Shares in Monstermob lost more than half their value yesterday after the mobile phone games and ringtones group warned changes to Chinese subscription rules would lead to a significant cut in its second half revenues.

China Mobile, the country’s biggest mobile phone operator, introduced the regulations at the weekend. The changes are aimed at cleaning up abusive billing practices among third-party wireless content providers.

Companies providing services such as ringtones must offer longer free trials and bill customers monthly, rather than per-download. Providers must notify subscribers twice when billing changes are about to occur.

Similar complaints in the UK last year prompted regulatory changes and led to Monstermob effectively abandoning its home market for emerging markets such as China and Russia.

China is one of Monstermob’s key regions, accounting for about 50 per cent of group revenues.

With 40 per cent of the revenue from its Chinese operations coming from ringtone subscriptions, the Lancaster-based company said it expected longer trial periods to put a squeeze on its revenue stream in the short term.

Monstermob also warned that another measure requiring subscribers manually to confirm their subscriptions a month after signing up would make it harder to sign up and retain subscribers.

The news, amounting to a third profit warning in four months, pushed shares down 77p to 59½p.

Niccolo de Masi, Monstermob’s recently appointed chief executive, called the market reaction “bizarre” and said the company’s three Chinese businesses were all market-leading services.

China Mobile’s plans would result in fewer mobile content providers with greater market shares. He was confident the group was well placed for the development of such a market.

Investec cut its rating, saying that as much as 20-30 per cent of the group’s underlying profits could be in jeopardy.

Last month Monstermob was forced to renegotiate payments to vendors for two Chinese subsidiaries after the businesses performed better than expected.

“The speed with which the UK business’s revenue was decimated following similar regulatory intervention does not bode well,” said Conor O’Shea, an analyst at Teather & Greenwood.

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