Updates on the WVAS Operating Environment From KongZhong Corporation

China Mobile Communication
, one of the telecommunications operator partners of
KongZhong Corporation, has begun to implement an additional
series of measures which are targeted at further improving the user experience
for mobile handset embedded services in addition to the introduction of a new
SMS code management system. The new measures are in addition to those measures that the Company
announced in its press release of December 10, 2009, which are currently still
in place.

Over the course of the next few weeks and under the guidance of China
Mobile, wireless value added services (WVAS) that are embedded in handsets
will be required to introduce additional notices and confirmations to
end-consumers during the purchase of such services.

Similarly, over the course of the next few weeks, services related to SMS
short codes will be required to be more tailored to the specific service
offering or service partner. Previously, a single SMS code could be used for
multiple service offerings or partners.

As these measures are implemented, the Company expects its first quarter
2010 WVAS revenues (which do not include mobile games, WIS or online game
revenues) to decline by approximately 20% to 25% from third quarter 2009
levels, or to be between US$ 19.0 million to US$ 20.0 million in the
three-month period ending March 31, 2010.

These new revenue projections for the Company’s WVAS business already
include the impact from the suspension of WAP billing, previously announced in
its press release of December 10, 2009.

However, the Company does not expect its mobile game operations to be
significantly impacted, and expects no impact on its online game operations as
a result of these new policies.

The Company is actively reviewing its business operations to adjust to the
new policy changes in the WVAS market. These new policy changes are expected
to potentially significantly reduce the number of service providers in the
market in the coming months, which may benefit more established service
providers, such as the Company, over the longer term. Moreover, the Company
expects these new measures to create a foundation for a healthier market
environment as the Company and its mobile operator partners seek to develop
and the expand the WVAS market for 3G services.


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