A8 Digital Music Holdings is revamping its business amid regulatory and policy changes that affect its delivery of so-called mobile value-added services (MVAS) on the mainland.
The leading provider of ring tones and other audio content to mobile-telephone users yesterday reported net profit fell in the first half as it pursued new initiatives.
'The business of the group will be in a transitional period in the coming years,' chairman Alvin Liu Xiaosong (left) said.
First-half net profit fell 55 per cent from a year earlier to 20.09 million yuan (HK$22.98 million) on lower MVAS revenue, higher marketing costs and additional expenses to set up new lines of business.
Revenue rose 23 per cent to 358.64 million yuan.
Since the beginning of this year, the State Administration of Radio, Film and Television, the Ministry of Industry and Information Technology and the nation's three main telecommunications carriers implemented a series of measures in the MVAS market segment in response to mobile-telephone users' complaints against misleading production promotions and other issues.
China Mobile, for example, called on MVAS players to provide reminders on charges and multiple confirmations for users before they subscribe to their products.
According to a report by iResearch Consulting Group, total MVAS revenue on the mainland during the first half slipped 7.8 per cent year on year to 6.02 billion yuan.
In its filing with the Hong Kong stock exchange, A8 Digital said the regulatory environment for the MVAS market segment would remain uncertain in the second half of this year.
That anticipated scenario has led A8 Digital to streamline its MVAS operations, cutting staff, administration costs, sales and promotions expenses, representing savings of more than 10 million yuan.
The firm has swiftly moved to expand its co-operation with major mobile-telephone makers. It has secured deals with Nokia and Lenovo Group to provide music download services to users of their handsets.
More diverse, internet-stored offerings will also be introduced. Liu said the firm aimed to be 'a leading digital music-culture company'.
A8 Digital shares fell 15.3 per cent to close at HK$3.55 yesterday.