Naspers scours emerg­ing mar­kets to repli­cate Ten­cent suc­cess

The Pak Banker - - Company& -

HONG KONG: Naspers Ltd., whose $32 mil­lion bet on Ten­cent Hold­ings Ltd. has swelled in value to more than $14 bil­lion, aims to repli­cate that suc­cess by scour­ing emerg­ing mar­kets where the two com­pa­nies are jointly the biggest In­ter­net in­vestors.

Naspers, South Africa's biggest me­dia com­pany, and Shen­zhen-based Ten­cent jointly spent $688 mil­lion this year for a stake in Group Ltd., the Rus­sian e-mail com­pany that owns parts of Face­book Inc. Ten­cent has also fol­lowed Naspers in in­vest­ments in In­dia and Thai­land, and said it's con­sid­er­ing fur­ther op­por­tu­ni­ties with its biggest share­holder.

The al­liance com­bines Naspers's ex­pe­ri­ence in in­vest­ing over­seas with the fi­nan­cial mus­cle be­hind Ten­cent's 637 mil­lion user ac­counts as they search for bud­ding dot-coms.

That may give them an edge for their next pur­chase in the fastest-grow­ing re­gions of the world­wide Web as Google Inc., the world's most ac­quis­i­tive In­ter­net com­pany, fo­cuses on U.S. ac­qui­si­tions.

"Naspers has been very suc­cess­ful for a long time in­vest­ing in mar­kets that es­tab­lished western in­vestors have ig­nored," said Bill Bishop, a Bei­jing-based in­de­pen­dent me­dia con­sul­tant. "Naspers cre­ated on its own an in­cred­i­bly pow­er­ful port­fo­lio across the de­vel­op­ing world that fits well with Ten­cent's own plans for go­ing out of China."

The ties stretch back to 2001, when Naspers bought 46.5 per­cent of Ten­cent for $32 mil­lion. That made Naspers the largest share­holder in what was then a three-year-old com­pany of­fer­ing a Chi­nese in­stant-mes­sag­ing ser­vice called QQ to 18 mil­lion cus­tomers.

The value of the stake, now di­luted to 35 per­cent, has since jumped more than 400-fold to ex­ceed $14 bil­lion as Ten­cent turned into the world's third-largest dot-com by mar­ket value.

Naspers tar­gets com­pa­nies with strong, en­tre­pre­neur­ial man­age­ment, rather than star­tups, said An­tonie Roux, head of the In­ter­net op­er­a­tions and a mem­ber of Ten­cent's board of di­rec­tors.

Rather than con­trol­ling in­vest­ments, Naspers prefers to of­fer ac­cess to ex­per­tise from its "con­fed­er­a­tion" of hold­ings, he said.

"We don't mi­cro­man­age these guys," Roux said in a Dec. 2 in­ter­view. "That's why we haven't lost one sin­gle en­tre­pre­neur founder."

The African me­dia group also has stakes in more than 50 In­ter­net com­pa­nies across Africa, Asia, Europe and Latin Amer­ica, ac­cord­ing to Naspers Chief Ex­ec­u­tive Of­fi­cer Koos Bekker.

Naspers spent 4.57 bil­lion rand ($663 mil­lion) on pur­chases in the six months to Septem­ber, in­clud­ing $388 mil­lion in, $144 mil­lion OLX Inc. for its clas­si­fied-ads busi­ness in Latin Amer­ica and $44 mil­lion in Mul­ti­ply Inc. for its on-line shop­ping in South­east Asia.

All of Ten­cent's dis­closed over­seas pur­chases have in­volved its African part­ner. In 2008, it bought a stake in a Naspers sub­sidiary in In­dia. This year, Ten­cent bought 10 per­cent of for $300 mil­lion and 49.9 per­cent of Sanook, a Naspers unit in Thai­land.

While Naspers and Ten­cent pur­sue as­sets in emerg­ing mar­kets, larger U.S. com­pa­nies may be missing out, ac­cord­ing to Bishop.

Google spent $1.6 bil­lion buy­ing more than 20 com­pa­nies, mostly in the U.S., in the first nine months of the year, ac­cord­ing to reg­u­la­tory fil­ings.

"We look at ac­qui­si­tions across the en­tire globe, but prob­a­bly there are more in the United States," said Alan Eus­tace, who serves as a mem­ber of Google's op­er­at­ing com­mit­tee with founders Sergey Brin and Larry Page.

Not all in­vest­ments by Naspers have been suc­cess­ful. It en­tered China in 1998, set­ting up an In­ter­net ser­vice provider. Af­ter fail­ing to earn a profit, the com­pany shut the busi­ness in 2001. The ex­pe­ri­ence taught the com­pany to use lo­cal man­agers be­cause they are more knowl­edge­able than ex­pa­tri­ates, ac­cord­ing to Naspers.

"We don't place any ex­pats in any of our busi­nesses," Roux said. "Zero. Not a sin­gle one."

With Ten­cent, Naspers doesn't mind keep­ing a sec­ondary role be­cause of its con­fi­dence in Chair­man Pony Ma Hu­ateng and Pres­i­dent Martin Lau, CEO Bekker said.

"We make a con­tri­bu­tion but we don't con­trol or we don't lead it," Bekker said in an in­ter­view last month. "We are quite happy with that struc­ture."

Ma and Chief Technology Of­fi­cer Zhang Zhi­dong were among the dozen founders that started Ten­cent. At least four of them were 1993 grad­u­ates of Shen­zhen Uni­ver­sity, ac­cord­ing to the com­pany's web­site.

As the num­ber of QQ ac­counts surged, Ma be­gan of­fer­ing add-ons such as a game por­tal in 2003, a so­cial net­work­ing ser­vice in 2005 and a pay­ment sys­tem in 2006. The com­pany went pub­lic in Hong Kong in 2004 and the stock has since jumped al­most 50-fold.

Ten­cent plans to grad­u­ally ex­pand in­ter­na­tion­ally, Lau told in­vestors in May. -Bloomberg

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