CCTV programme forces Focus Media to impose phone spam ban
Focus Media Holding, the mainland's largest outdoor media company, said it would stop sending mobile spam advertisements after a China Central Television (CCTV) programme named it as a major source of spam.
The company, whose shares dropped more than 25 per cent after the programme, said a subsidiary responsible for mobile advertisements had set up a toll-free number for people to report spam following allegations made in the report. It had also established an internal policy to ban sending mobile messages without a telephone user's permission.
The company said the database it used for advertising had been based on information received during the normal course of business. But if it found any employee using information obtained without a user's consent, it would take action, including firing the employee.
State-owned CCTV broadcast a consumer protection programme on March 15 that claimed Focus Media held personal information on about half of the nation's mobile-telephone users and was sending about 200 million short messages each day.
The report also said several mobile advertising companies had illegally collected from banks users' personal information, including gender, age and income.
Sun Wensu, the head of the State General Administration of Industry and Commerce, told CCTV that the government forbade any illegal transfer of personal information and the spreading of deceitful advertisements to mobile users.
Focus Media's Nasdaq-traded shares fell 26.59 per cent to US$32.19 on March 17 before recovering to US$36.37 on Friday. That was still 17.06 per cent below their closing price of US$43.85 on the previous Friday before the report was aired.
'The market has overreacted,' said Richard Ji, an executive director of Morgan Stanley, noting mobile advertisements were a small share of the company's total sales.
Focus Media said mobile advertising contributed about 8.6 per cent of sales in the fourth quarter.
But the report might force mobile carriers to tighten their restrictions on Focus Media's mobile advertising and delay the potential listing of the mobile division, Mr Ji said.
Focus Media started its mobile division by acquiring DodAd in March last year for US$30 million. The division recorded US$16 million in revenue in the fourth quarter, up 355 per cent from a year earlier and 14 per cent from the previous quarter.
Focus Media planned to spin off DodAd in either Hong Kong or the United States.
The company's earnings climbed 73.6 per cent to US$83.2 million last year, as sales soared 139.1 per cent to US$506.6 million. It expects revenue to reach between US$900 million and US$930 million this year.
Net income is expected at between US$280 million and US$300 million.
Nice little earner
Focus Media said that in terms of sales in the fourth quarter, mobile advertising contributed: 8.6%