The mainland's leading short message service (SMS) provider is in the process of getting listed in Hong Kong, a source close to the deal said.

 

China SMS is likely to go public in Hong Kong in the first half of the year, Peter Yau, executive director of Hong Kong-listed Sino Katalytics Investment Corp, told China Daily.

 

Yau refused to reveal more details such as initial public offering (IPO) size, only saying China SMS' listing effort is part of Sino Katalytics Investment's strategy of streamlining its assets.

 

Sino Katalytics Investment, formerly known as China Northern Enterprises Investment Fund Ltd, spent HK$5 million (US$625,000) on a 10 percent stake in China SMS a year ago.

 

China SMS has not commented on the listing.

 

The five-year-old company, which has grown up with the mainland's short message boom, earns money by providing SMS mainly to corporate customers.

 

The company offers wireless services that cover all mobile networks on the mainland through a number of its patented software and technologies, according to information on its website.

 

China SMS posted double-digit increases in its operating income in the past few years, it said, without specifying the growth or providing a database. It now has 42,895 clients.

 

The company helped its clients send a total of more than 500 million messages in 2005, up from 200 million a year earlier, a China Securities Journal report said in December.

 

Hong Kong-based analysts said China SMS is in a lucrative market and faces an industrial take-off.

 

The use of short messages is gaining popularity in the mainland on the back of an increasing number of mobile users. SMS has become a major profit engine for the mainland's telecom operators, NASDAQ-listed Internet portals Sina, Netease and Sohu, as well as a number of other Internet firms such as Tencent.

 

"The SMS market may nearly double in size if the mainland issues third-generation (3G) licences," said an analyst. Signs have shown mainland authorities may release its first 3G licences sometime this year.

 

In 2005, mainland mobile phone users sent a per capita number of 781 short messages, based on data provided by the Ministry of Information Industry, the market watchdog.

 

By the end of last year, the mainland had 390 million mobile users, 58.6 million more than 2004. They sent a total of 304.65 billion short messages, an increase of 40 percent on a yearly basis.

 

SMS generated a revenue exceeding 50 billion yuan (US$6.25 billion) last year. But less than 1 percent was made by corporate users, according to Chen Zhiyu, China SMS' general manager.

 

That means corporate SMS business has major potential to grow, given the experience in developed economies, Chen has said.

 

(China Daily February 16, 2006)