The Miami Herald from Miami, Florida • 262

The Herald Thursday august 212001 Chinese cellphone profits hurt by no-frills customers GLUM NEWS: Juergen Weber chairman of the board of directors of Lufthansa attends the annual shareholders' meeting in June profit drops 89 percent rate One of the new subscribers was Chen the department store clerk She paid $120 for a handset a phone number and about a worth of calls It represented about one salary for her wanted to replace my old mobile phone with a cheaper one" she said To keep up with growth China Mobile spent $37 billion on new infrastructure in the first six months of this year alone That kind of investment has been a boon for foreign equipment-makers It contributed a big chunk of $4 billion in sales last year in China said company spokesman Michael Ning Other foreigners been so lucky however and China is intent on building a homegrown telecommunications industry Companies that have had success like handset makers Nokia of Finland and LM Ericsson of Sweden are losing market share to government-owned and funded domestic competitors Meanwhile foreign service providers have lobbied for years for market entry and are still barred telecoms are tiring of this endless waiting said Martin Kralik senior analyst at Strategic Intelligence a Singapore-based market research company are frustrated because invested so much but penetrated in a meaningful Pacific Century Cyberworks Hong largest cellphone service provider is among the companies with good reason to be frustrated: It has yet to make a dime in China Still it -giving up have to be patient all we can do now in mainland Jimmy Wei a company spokesman said BY MARTIN FACKLEB Assocsa'ed Press SHANGHAI China At first glance Chen Xiaomei seems like the sort of customer wireless companies would dream about: The 23-year-old department store clerk is so fond of cellphones she just bought a new one her second in two years But in making her purchase at a Shanghai shopping mall Chen didn't even glance at the more expensive hand sets offering Internet access and e-mail "I want all that" she said "I just want to talk to my friends" She walked out with a simple model costing $100 "Low-end in industry parlance Chen and others like her are helping keep the shine off a wireless market that already rivals that of the United States in size and could easily dwarf it soon They want basic no-frills voice service Companies are having a hard time persuading them to upgrade to phones that can also read e-mail store numbers download movies extras that fatten profit margins China the low-end subscriber is somebody who only has a couple of extra dollars a month That leave a big margin" said Ted Dean an analyst at Beijing-based BDA China Ltd Ministry of Infor-mation and Industry announced the number of mobile phone owners jumped by half in roughly 12 months to 1206 million in July That would make it the largest market surpassing the United 1203 million Some suspect the counting method overstates the number of users But no one doubts the market potential of 126 billion people SMALL PROFITS: China has the largest number of cellphone users: 1206 million people Most of these customers choose to pay for only the most basic of services more than 20 percent off China Hong Kong-listed shares in three days To spur growth companies have been lowering costs to consumers Until last year buyers had to pay a $60 registration fee and monthly service charges of at least $6 and then were charged for every call made and received on top of that a lot in a country where the average city dweller makes $750 a year In October prepaid calling cards and over-the- counter phone numbers costing $1250 appeared The cheaper rates helped attract 38 million new subscribers per month this year more than twice the US growth BYHANSGREIMEL Associated Press FRANKFURT Germany Hit hard by a strike declining business travel and a drop in cargo shipments German airline Lufthansa AG posted an 89 percent tumble in second-quarter net profit Wednesday but stood by earlier full-year earnings forecasts Lufthansa shares rose by as much as 25 percent to 1695 euros ($1542) in early Frankfurt trading on news that it still expected an operating profit between 700 million and 750 million euros ($637 million and $682 million) this year But second-largest airline cautioned that the forecast hinged on an overall economic recovery in the fourth quarter and on profit margins remaining stable The company was already 'forced to scale back an earlier forecast in June when it scrapped hopes of racking up 1 billion euros ($917 million) the first half of 2001 we managed to hold our own in an increasingly difficult market environment though we were unable to achieve the ambitious targets which we had set Lufthansa said in a statement Lufthansa shares later gave up some ground as analysts wavered on the latest forecast Merrill Lynch called the forecast but said the company could be one of the first to stage a comeback if the economy improves For the second quarter ended June 30 net earnings dropped to 51 million euros ($46 million) compared with 455 million euros last year The company detail second-quarter figures The results were calculated by subtracting first-quarter earnings from half-year numbers Lufthansa blamed the battered bottom line on a combination of factors including About one in 10 Chinese has a cellphone compared to four in 10 Americans Analysts predict that by 2005 China could add another 250 million users Wringing profits from that growth is getting harder China Mobile the larger of two wireless phone service providers last week reported first-half earnings of $167 billion Analysts had expected earnings of $L8 billion and noted a 21 percent drop in the amount of money China Mobile earned per user each month to $19 By compari- son earnings per user in the American market average $50 The decline helped knock A strike and a decline in travel and cargo hurt the airline decreased demand for business travel amid a global economic slowdown and flight cancella- tions caused by three costly strikes in May The walkouts grounded thousands of passengers and set the company back 75 million euros ($68 million) The labor dispute pressured Luft- hansa into signing a new three-year contract that increased pay by 230 million marks ($209 million) in the first year alone That contributed to the ris- ing staffing costs the airline has racked up so far this year Overall staffing costs rose 10 percent to 941 million euros ($846 million) in the first half of the year the company said Earnings were further diluted in the first-half of the year by a 3 percent decline in -sales at the cargo unit and an increase in fuel prices Despite the troubles the number of passengers flying Lufthansa in the first half of 2001 actually rose by L3 percent to 202 million people But even -that was outpaced by a 61 percent increase in capacity to 1 carry passengers the company noted This month Lufthansa said it would try to prop up profits by curtailing flights to New York Rio de Janeiro and other long-haul destinations For the first six months of 2001 Lufthansa chalked up a loss of 43 million euros ($39 million) compared with a net -profit of 121 million euros for -the same period last year Revenues for the first-half of 1 the year rose 14 percent to 78 -billion euros ($71 billion) from 68 billion euros last year Child goes after T-shirt fakes MICHAEL CAULFIELDAP FILE FIGHTING BACK: Child is among the latest music groups to get a court order to combat the sale of counterfeit T-shirts said one is to get hurt talking about T-shirts here Rule No 1 Rule No 2 is the In a way it is a cat-and-mouse The court process was set up this way because hard to file individual suits against bootleggers Often they use phony names carry identification or are merely pawns for the makers of counterfeit material There has been some increase in criminal prosecutions of merchandise counterfeiting although it typically focuses on the influx of pirated movies software and videos from overseas Tillery has represented the National Football League Eric Clapton Boyz II Men Marilyn Manson Backstreet Boys and Bon Jovi clients include the Who Aerosmith U2 Shania Twain Motley Crue Dire Straits and the Spice Girls A few facilities such as the First Union Spectrum in Philadelphia have their own court order that protects anyone who appears at the arena The order has been in place for 20 years Tillery said The lawyers say they get much sympathy from concert-goers who cringe at high prices for authorized merchandise inside the stadiums they may be expensive but you know why? My clients pay taxes pay appropriate wages pay a percentage to the Tillery said people in the parking lot do those things they also not care if I pulled up in a truck and offered a television that they just stole from he asked they encourage people trafficking in stolen goods? It is stolen One is personal property stolen the other is intellectual property BY SUSAN DECKER Bloomberg News HERSHEY Pa Child the pop group known for Bootylicious and Survivor is singing No to T-shirt bootleggers Singers Beyonce Knowles Kelly Rowland and Michelle Williams and their merchandiser Bravado International Group Merchandising are among the latest entertainers to get a court order to combat the sale of counterfeit T-shirts outside their concerts Such orders let a representatives seize bootleg merchandise being sold without the permission Because musicians own their own trademarks the burden is on them not record companies to use the courts to guard against misuse of their name or likeness The battle has been going on for decades long before musicians had to worry about Napster and free downloads of songs over the Internet began in the with the popularity of T-shirt sales at rock concerts said trademark lawyer Kelly Tillery who represents Child became a big business and people who had legitimate rights were being counterfeited left and There are no figures on how much money bootleggers make from counterfeit merchandise sales The recording industry loses $45 billion worldwide to pirated sound recordings excluding losses from Internet downloads said Frank Creighton director of the Recording Industry Association of anti-piracy unit "This particular suit about recovering said Kenneth A Feinswog a trademark and copyright lawyer who filed an anti-bootlegging AXEL SEIDEMANNAP FILE TOUGH YEAR: For the quarter ended June 30 net earnings dropped to 51 million euros compared to 455 million last year JC Penney reiterates forecast suit on behalf of the band Depeche Mode this spring about stopping the infringement and seizing the infringing Groups usually seek a court order to block sales of bootleg T-shirts and other merchandise such as decals and hats for an entire concert series Just about every major group does it Even members of the rock band The Grateful Dead known for letting fans record their concerts drew the line at bootleg T-shirts record their concerts and share concerts among fans is one thing because they know still going to buy their said Tillery of Philadelphia last thing you want is someone who is unauthorized and who is not paying you a royalty selling merchandise bearing your not just musicians that seek such court orders Theater groups circuses and even Lyr-ick Studios the license holder for Barney the Dinosaur have sought and received them The process has become almost formulaic An enter tainer files a trademark suit against Does No 1 through in the federal court closest to the first appearance on the tour The lawsuit seeks to block sales of any merchandise that illegally uses the likeness The judge grants an order and bootleggers at the first show are given a copy and told to appear in court the next morning do defendants come in to contest Feinswog said because scared to go in to court They know infringing rights and they like to maintain their With little or no objection the band gets an order that covers every date and location on the tour The order allows law-enforcement officials or process-servers hired by the entertainer to seize infringing merchandise It saves the band the trouble of getting such an order in every town on the tour schedule the person runs we chase them but we avoid physical contact at all Tillery NEW YORK JC Penney Co reiterated Wednesday its earnings forecasts for the third quarter and the full year and said it would conduct a business briefing for big shareholders later this week The company said its earnings will be in the range of 10 cents to 15 cents a share in the third quarter and 30 cents to 35 cents a share for the full year The consensus forecast of analysts surveyed by Thomson FinancialFirst Call was for 14 cents a share for the third quarter and 34 cents a share for the year Last week Penney reported a loss of $69 million or 29 cents per share in its second quarter compared to a profit of $23 mil- lion or 6 cents per share in the year-ago period In a statement last week Allen Questrom chairman and chief executive officer said that the second-quarter results provided some signs that the company is mak- ing some progress rebuilding its business He noted that he expected improved third-quarter results for department store catalog and its Eckerd -Drugstore business eg-yy 1 4.