In a note yesterday, Goldman Sachs commented that Chinese stocks that derive the majority of their revenue from delivering wireless content i.e. Tom Online (TOMO), Sina (SINA), Linktone (LTON) and KongZhong (KONG), deserve to trade at lower multiples than online gaming companies. Why?
Because they are exposed to revenue sharing agreements with China Mobile. Goldman believes that the wireless content companies' share of user spending may drop over time from the current 85% share to as little as a 60%-70% share, even as China Mobile increases service fees.
Today's government announcement that party members must get more involved in managing state-controlled businesses might facilitate such a decision.