Rob Rose And John Helmer
25 January 2007
Johannesburg — NASPERS' stock powered to a new record yesterday, as the media company struck it third time lucky in Russia by nailing down a $165m deal to buy into the country's largest internet portal.
This is a crucial step for Naspers' strategy to expand into fast-growing emerging markets, considering it has pinned its future growth on investments in Brazil, Russia, China, India and Africa.
Last year, Naspers spent $422m buying 30% of Brazil's largest magazine publishing house, Abril, adding to its investment in China's instant messaging business Tencent and its fledgling investment in India's competitive internet sector.
Naspers investor relations spokeswoman Beverley Branford says that now that her company has its foot in the door in Russia, it is eyeing other opportunities in the pay-television and newspaper sector in that country.
"There are many companies we're talking to right now in many different countries, some of which are still in an exploratory stage," she says.
This week's deal saw Naspers buy 30% of mail.ru, a Russian internet portal that offers e-mail, blogs, video sharing and news, and which attracts more than 24-million Russians every month, according to estimates.
On that news, Naspers' shares climbed 2,4% yesterday on the JSE to hit R177,76.
But Antonie Roux, CEO of Naspers' internet operations, says the deal is as much about getting a foothold in the Russian economy as it is about mail.ru.
"The Russian economy has been growing at 7% for the past few years. Internet penetration in the US is 64%, and in China it is 8%. But in Russia, internet penetration is 13% and growing fast," he says.
Roux says that when it comes to Naspers' two-and-a-half-year-old Indian internet venture, the company has a five-year plan to make significant inroads into that country, which has the fastest-growing internet population in the world.
"We talk of it being a few years before we reach break-even in India," he says.
Overall, Naspers' internet division made operating losses last year of R153m amid an overall operating profit of more than R3bn, a figure that reflects the company's investment in internet assets around the world.
Roux says he would "like to believe" that the internet division will begin to start showing a profit in the short term.
While Naspers has been reluctant to comment publicly on its forays into the Russian market, this appears to be third time lucky for the group.
In May last year, Naspers tried to negotiate a share in Russian publisher SK-Press, which produces a number of glossy consumer magazines, such as Men's Fitness, Auto Motor and Sport, and InStyle. The deal failed.
Then in September, after reports were leaked by anxious sellers in Moscow, Naspers acknowledged it was negotiating to buy a sizeable shareholding in Promsvyazcapital, which owns two well-known Russian publications, Argumenty i Fakty and the daily newspaper Trud.
The reports emanated from the sellers, the Ananev family, and the asking price was reported to have been between $400m and $500m. Media analysts at the time said that Naspers would be foolish to pay the price, and end up with no control of the asset.
In the latest deal, Naspers has again opted to buy a minority share.
The value of Russian assets, along with consumer income and advertising volumes, is linked to the international price of oil and gas, the principal export and the commodity around which the Russian stock market is built.
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