The Miami Herald from Miami, Florida on August 23, 2001 · 262
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The Miami Herald from Miami, Florida · 262

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Miami, Florida
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Thursday, August 23, 2001
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262
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The Herald Thursday august 212001 Chinese cellphone profits hurt by no-frills customers 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 don’t want all that" she said "I just want to talk to my friends" She walked out with a simple model costing $100 "Low-end subscribers” 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 “In China the low-end subscriber is somebody who only has a couple of extra dollars a month That doesn’t leave a big margin" said Ted Dean an analyst at Beijing-based BDA China Ltd China’s 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 world’s largest market surpassing the United States’ 1203 million Some suspect the ministry’s counting method overstates the number of users But no one doubts the market potential of 126 billion people SMALL PROFITS: China has the world’s largest number of cellphone users: 1206 million people Most of these customers choose to pay for only the most basic of services 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 China’s 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 more than 20 percent off China Mobile’s 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 That’s 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 rate One of the new subscribers was Chen the department store clerk She paid $120 for a handset a phone number and about a month’s worth of calls It represented about one month’s salary for her “I 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 Motorola’s $4 billion in sales last year in China said company spokesman Michael Ning Other foreigners haven’t 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 “Global telecoms are tiring of this endless waiting game” said Martin Kralik senior analyst at Strategic Intelligence a Singapore-based market research company “They are frustrated because they’ve invested so much but haven’t penetrated in a meaningful way” Pacific Century Cyberworks Hong Kong’s 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 isn’t -giving up “Foreigners have to be patient That’s all we can do now in mainland China” Jimmy Wei a company spokesman said Destiny’s Child goes after T-shirt fakes MICHAEL CAULFIELDAP FILE FIGHTING BACK: Destiny’s Child is among the latest music groups to get a court order to combat the sale of counterfeit T-shirts BY SUSAN DECKER Bloomberg News HERSHEY Pa — Destiny’s Child the pop group known for Bootylicious and Survivor is singing “No No 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 group’s representatives seize bootleg merchandise being sold without the group’s 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 “It began in the 1970s” with the popularity of T-shirt sales at rock concerts said trademark lawyer Kelly Tillery who represents Destiny’s Child “It became a big business and people who had legitimate rights were being counterfeited left and right” " 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 America’s anti-piracy unit "This particular suit isn’t about recovering money” said Kenneth A Feinswog a trademark and copyright lawyer who filed an anti-bootlegging suit on behalf of the band Depeche Mode this spring “It’s about stopping the infringement and seizing the infringing merchandise” 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 “To record their concerts and share concerts among fans is one thing because they know you’re still going to buy their CDs” said Tillery of Philadelphia “The last thing you want is someone who is unauthorized and who is not paying you a royalty selling merchandise bearing your likeness” It’s 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 “John Does No 1 through 10” 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 musician’s 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 “Rarely do defendants come in to contest these” Feinswog said “Usually it’s because they’re scared to go in to court They know they’re infringing someone’s rights and they like to maintain their anonymity” 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 “If the person runs we chase them but we avoid physical contact at all times” Tillery said “No one is to get hurt We’re talking about T-shirts here That’s Rule No 1 Rule No 2 is ‘get the T-shirts’ In a way it is a cat-and-mouse game” The court process was set up this way because it’s hard to file individual suits against bootleggers Often they use phony names don’t 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 Feinswog’s 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 Spectrum’s order has been in place for 20 years Tillery said The lawyers say they don’t get much sympathy from concert-goers who cringe at high prices for authorized merchandise inside the stadiums “Sure they may be expensive but you know why? My clients pay taxes pay appropriate wages pay a percentage to the venue” Tillery said “The people in the parking lot don’t do those things “Would they also not care if I pulled up in a truck and offered a television that they just stole from Sears?” he asked “Would they encourage people trafficking in stolen goods? It is stolen One is personal property stolen the other is intellectual property stolen” GLUM NEWS: Juergen Weber chairman of the board of directors of Lufthansa attends the annual shareholders' meeting in June Lufthansa’s profit drops 89 percent BYHANSGREIMEL Associated Press FRANKFURT Germany — Hit hard by a pilots’ 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 Europe’s 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) “In 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 ourselves” Lufthansa said in a statement Lufthansa shares later gave up some ground as analysts wavered on the latest forecast Merrill Lynch called the airline’s forecast “surprisingly optimistic” 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 didn’t 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 A pilots’ 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 pilots’ 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 pilots’ pay by 230 million marks ($209 million) in the first year t 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 company’s 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 J noted j 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 m 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 NEW YORK (AP)— 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 “encouraging 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 j r v 1 4

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