'Sina's online advertising is growing strongly. However, its wireless business is dragging the overall result,' JP Morgan internet analyst Dick Wei said.

Sina's advertising revenue shot up 42 per cent to US$35 million, outpacing the second-largest portal, Sohu, whose online brand advertising grew about 30.2 per cent. However, Sina's revenue from wireless valued-added services shrank 23 per cent to US$20.6 million.

Just like Sohu, which released its results earlier, Sina's wireless services took a tumble after China Mobile last July imposed new rules to better protect users against bogus charges such as requiring double confirmation before subscribing to new valued-added services.

These measures had reduced the number of new subscribers and increased the ranks of users terminating their subscriptions for many wireless valued-added providers.

'If Sina and Sohu were not doing well in their wireless business, it is likely that other players would be suffering as well,' said Mr Wei.

Other players in the sector include Tom Online, Tencent, Kongzhong and Linktone.

Their earnings have suffered since last quarter. Earnings of Tom Online, the leading wireless value-added service provider in China, fell 59 per cent in the third quarter from a year earlier. And it is unlikely the sector will recover soon.

'The rules were executed province by province. More provinces will implement the rules in the first quarter. In addition, the wireless value-added service providers are afraid to do more marketing for their services in case that would annoy the Ministry of Information Industry or China Mobile,' said Mr Wei.

Meanwhile, Shanda, China's second-biggest online games operator, is offloading more of its stake in Sina.

But Shanda was more likely taking profit than indicating it was down on Sina, said Mr Wei.

'Shanda has no strategic reason for holding Sina - the two companies have no substantial co-operation in their businesses. The share sales will give Shanda a nice profit that it can put into developing other businesses,' he added.

Shanda in February 2005 acquired an 18 per cent stake or 9.8 million shares in Sina at US$22 to US$30 each. It is offering them at US$32.40 to US$33.40 apiece.

This is the second time Shanda cut its Sina stake. In November last year, it sold 3.7 million shares at US$26.76 to US$27.32 each, raising about US$101 million to finance the payment of its US$200 million convertible bonds that would fall due in the second half of this year.

After the most recent sale, Shanda will hold two million shares or 3.7 per cent of Sina.

Even when Shanda was its largest shareholder, the gaming company had little to say about the portal's directions, said an industry expert who did not want to be named.

To fend off a potential takeover by Shanda, Sina Corp had adopted a 'poison pill' defence to discourage Shanda from gaining a controlling stake.