Hongkong.com plans to acquire mainland mobile service provider Palmweb to tap China's lucrative short messaging services (SMS) market. The former Internet portal - now an information technology solutions provider - said it would pay no more than US$55 million for Palmweb. Chief executive Rudy Chan said: 'This is our first major move to establish a foothold in China for future expansion. 'The acquisition fits our investment criteria as the company is profitable and has high-margin recurrent revenue. 'This is an opportunity for us to make judicious acquisitions that will underpin the company's future growth trajectory.' Hongkong.com will pay for Palmweb in three instalments. The first instalment of US$14 million will be paid after the deal is sealed next month. The following payments would be adjusted with reference to Palmweb's revenue contribution, Hongkong.com said. Palmweb has 2.8 million paying subscribers - SMS customers of both China Mobile and China Unicom. The company operates in 22 mainland provinces and claims a strong presence in the eastern provinces of Shangdong, Jiangsu and Jiujiang. Its subscribers can download ring tones and pictures to their handsets and also use mobile dating services. At the end of last year, Palmweb had net tangible assets of HK$65.5 million and recorded a net annual profit of HK$936,000. For its part, hongkong.com posted a HK$27.1 million profit last year, leading its Nasdaq-listed parent, Chinadotcom, into the black with a US$1.17 million profit in the final quarter. Hongkong.com had about HK$119 million in cash and HK$2 billion invested in interest-bearing securities at the end of last year.