Tom Online seeks new outlet for services
Tom Online is negotiating with China's fixed-line carriers to offer services over cheaper intra-city networks in what could be a new source of revenue.
The services would be delivered using a wireless technology - personal access system (PAS), or xiaolingtong, offered by state-run carriers China Telecom and China Netcom Corp.
Tom Online's chief executive, Wang Leilei, said any deal would be similar to the revenue-sharing agreements Tom and other internet companies have signed with the dominant wireless carriers, China Unicom and China Mobile.
'We know there's a potential market in the business,' Mr Wang said at a ceremony in Beijing for the company's new logo. He would not provide estimates of when either carrier might be willing to sign an agreement.
Currently, Tom Online receives 75 per cent of any short-message service revenue, with the remainder going to China Mobile or China Unicom. For services requiring more bandwidth, Tom Online gets 85 per cent.
China had 32 million PAS subscribers at the end of last year, with 20 million held by China Telecom and China Netcom, according to UTStarcom, which provides equipment to this market.
Although far less than the 300 million wireless customers in China, a deal with the fixed-line operators for PAS would give Tom access to a large new customer base.
PAS has distance limitations and limited roaming but it has become widely popular in price-sensitive China. The technology has enabled China Telecom and China Netcom to compete against China Mobile and China Unicom.
But expectations of slower growth for PAS services this year and next, along with competition from 3G, means PAS providers are looking for new ways to earn revenue.
Value-added services such as downloadable ringtones have enjoyed explosive growth in China but led to a struggle between operators and service providers to divide the revenue.
Wallace Cheung, a technology analyst at DBS Vickers, has questioned Tom's heavy reliance on value-added services, including downloadable ringtones and other information.
Last year, these services accounted for 78 per cent of Tom Online's US$80 million in revenue.
In another strategy for growth, Tom Online is also seeking to make acquisitions using about half of the money it raised from an initial public offering.
Tom.com raised US$170 million from a Nasdaq listing last week and is now a closely watched stock for the fate of the internet sector.
