Chinese Internet stocks hemorrhaged Friday following news that China's mobile network operators introduced new rules for wireless service providers, in spite of analyst optimism that changes will benefit big players in the long run.

China Mobile Ltd., the mainland's major wireless telecommunications company, announced new rules Friday aimed at cleaning up bad billing practices among service providers.

Under the new rules, companies that provide services such as text messaging must offer longer free trials and bill customers monthly, rather than per-message.

Service providers must also notify subscribers twice when billing changes are about to occur. China Unicom Ltd., a competing carrier, will also convert its per-message billing system to a monthly one.

In anticipation of the changes, ThinkEquity analyst Michael Zhang wrote a note Wednesday urging investors to buy. Increased regulation for wireless value-added service companies -- those that provide software and entertainment content for cell phones -- could cause a shake-up, but the strongest companies will come out winners.

"A potential industry shake-up should bring down the unreasonable valuations in the private sector, which will attract more buyers into the market," he wrote.

Still, the near-term implications have investors spooked, and Chinese Web companies and service providers saw stocks slide Friday on the news.

Sohu.com Inc., which provides a mix of wireless and online services via its Web portal, said Friday the new rules could reduce its wireless revenue, which reached US$8 million in the first quarter this year, by US$1.5 million to US$2.5 million in the third and fourth quarters of 2006.

Shares of Sohu slid US$1.79, or nearly 7 percent, to US$24.09 in midday trading on the Nasdaq.

Sina Corp., an online media, Web search portal and mobile-phone services company, said it expects the policy changes to hurt its wireless application and text-messaging businesses, and increase churn among mobile value-added services.

Shares of Sina fell US$1.73, or 7 percent, to US$22.91 in recent trading on the Nasdaq.

Other Chinese companies that rely on providing mobile content such as ringtones or news were hammered on the Nasdaq Friday morning.

Hurray Holding Co. Ltd., which provides ringtones, saw its American depositary shares shed 21 cents, or 4 percent, to US$5.12. Linktone Ltd., a wireless entertainment and media company, saw its ADSs fall 31 cents, or 5.8 percent, to US$5.05.

US-listed shares of Tom Online Inc., which delivers multimedia products over phones and on the Web, lost US$3.29, or 19.3 percent, to US$13.71.

KongZhong Corp., another wireless media company, cut its full-year guidance Friday on the new billing procedures, to US$85 million to US$105 million, down from its previous forecast of US$110 million to US$115 million. KongZhong's ADSs plunged 90 cents, or 12 percent, to US$6.60.

In the US, Internet bellwether stocks traded in range on a slow news day on the Nasdaq.

Shares of Google Inc. edged up US$3.23 to US$427.11; online auction company eBay.com saw shares gain 33 cents to US$27.18, and shares of Amazon.com Inc. rose 9 cents to US$36.89.

Among the light losers was Yahoo Inc., whose shares edged down 35 cents to US$32.76.