Some brokers are wondering whether the market's euphoria about recent transactions by SmarTone Telecommunications Holdings has gone too far. One investment house has even downgraded the stock. Goldman Sachs changed its recommendation to market underperform from market perform. SmarTone shares yesterday ended at $25.80, up 13.9 per cent this week. 'The fundamentals of the Hong Kong cellular market remain very difficult,' Goldman analyst Tim Storey said. 'And the competitive framework remains a significant barrier to success in the near term.' Analysts said SmarTone shares were mainly gaining on the back of Tuesday's announcement of an alliance with United States Internet company Yahoo! to provide content for iSmart, its Internet service. The stock was also supported by a report that SmarTone planned to buy a share holding in Taiwanese mobile operator Far East Tone. The Yahoo! deal, however, was viewed sceptically by analysts as not bringing any extra value to SmarTone. They pointed out the arrangement was a non-exclusive one in which Yahoo! could sign up with other local Internet service providers. 'The price reaction to this news does not seem rational,' Salomon Smith Barney analyst Lloyd Fischer said. Jardine Fleming Securities analyst Mark Go said: 'Sentiment-wise, it's great for SmarTone, but in terms of revenue impact, it's basically none.' 'We see it very much benefiting SmarTone in the context of being able to bundle it into their existing product lines - notably the cellular business - as a way to create better loyalty within their customer base,' Mr Storey said. Analysts said the agreement had caught hold of Hong Kong's recent Internet-mania, which started last month with the co-operative agreement between Hongkong Telecom and Microsoft Corp. Some brokers, however, said it was too early to judge whether SmarTone's stock was overvalued, as the company was just starting to reposition itself as an Internet-based business.