Naspers Owns A Third Of What Is Now China’s Most Valuable Company: What This Means For South Africa

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Written by Dana Sanchez

China’s Tencent Holdings, which is 34-percent owned by South Africa’s Naspers, bypassed government-owned China Mobile to become China’s most valuable corporation — a sign of the growing importance private companies play in its economy, Bloomberg reported, according to Tech Central.

The owner of popular social messaging app WeChat, Tencent is one of the world’s 10 largest public companies — a list that includes Apple and Google.

In 2001, Cape Town-based Naspers invested $32 million in Tencent, an investment that has grown to more than $80 billion today, Seeking Alpha reported. Founded in 1915 as a newspaper and magazine publisher, Naspers has become an Internet and media conglomerate. It is now Africa’s largest company and a leading Internet and media investor in the developing world.

In addition to Tencent, Naspers owns a 29 percent of Russian email service Mail.Ru Group. Tencent and Mail.Ru Group are the leading Internet and social media players in China and Russia today. They are also the leading players for mobile and instant messaging. These companies control dominant staying power.

Tencent has a government-sanctioned monopoly in China. Unlike in much of the world, China has effectively barred most of Tencent’s foreign rivals from the marketplace with strict regulations and requirements. This allowed Tencent to effectively corner an important part of the mobile communication market in China and to become a key compiler of essential marketing data.

The value of Naspers’ stake in Tencent outpaced the company’s own market capitalization, Seeking Alpha reported on Aug. 21, 2016. Naspers’ stake in Tencent is worth about $83 billion on the market. Naspers’ own market capitalization traded at $73 billion based on the closing price of $16.94 on Aug. 19. The two companies have often trended alongside each other in light of their relationship.

Tencent helped lift Naspers’ revenues by 6 percent to $12.2 billion for the financial year ending March 31, 2016, Fin24 reported.

In its full-year results, Naspers said its core headline earnings were up 21 percent in dollar terms and 77 percent of its revenues were generated outside of South Africa.

For the year ending Dec. 31 2015, Tencent recorded 30 percent annual growth.

Naspers’ stake in Russian email service, Mail.ru, also saw positive results with revenue for the year up 11 percent through December 2015.

Naspers’ e-commerce revenues increased 6 percent to $2.6 billion.

However, Naspers’ video entertainment revenues were down 11 percent year on year to $3.4 billion due to weaker African currencies, Fin24 reported.

China’s economy has slowed down in the past two years and it has failed to maintain its 8 percent growth. The slowdown in China’s economy weighed heavily on Naspers, IOL reported on Feb. 16. Naspers is the fourth largest company by market capitalization listed on the Johannesburg Stock exchange.

Naspers saw its share price falling more than 20 percent from November 2015 to mid-February as investors reduced risk appetite.

Naspers launched ShowMax in 2015 to compete with Internet streaming service Netflix.

In October, Naspers announced a $1.2 billion deal to become the largest shareholder in Avito, the leading online classifieds platform in Russia. The deal saw Naspers increasing its stake in Avito from 17.4 percent to 67.9 percent in a little over two years, IOL reported.

Here’s what else Naspers owns or has owned, according to Forbes:

Its MultiChoice satellite subscription service is the continent’s dominant provider of TV, through its subsidiaries DStv and SuperSport, and now has some 10-million satellite and digital subscribers.

It owned a share of MTN, one of South Africa’s first two cellular networks, but sold its stake, and several other businesses, and used this capital to invest in Internet businesses around the world.

Naspers chairman and former CEO Koos Bekker is a South African business legend, comparable in stature to a kind of Rupert Murdoch with some of Steve Jobs’ visionary genius. Bekker has grown Naspers into the giant it is today. His most significant investment, which accounts for the bulk of Naspers share value, was a 34 percent stake in Tencent, whose WeChat now has 800-million global users.

The group also owns stakes in India’s largest online retailer (Flipkart).

“Naspers is probably one of the most formidable media companies in the developing world,” said Arthur Goldstuck, managing director of researchers World Wide Worx. “They have taken many outrageous bets and won big on many of those bets. They don’t always succeed, but when they do, they do it in spectacular fashion.”

“The first of their truly massive success stories was MultiChoice itself.

Their e-commerce play in India, Flipkart, could be as good as Tencent – it’s the Alibaba of India and Naspers own one fifth of it, 19 percent. You can expect to see big numbers coming from there. We tend to focus on the contribution made by Tencent and other Asian and East European players. But Naspers’s impact across Africa is huge and it still has big growth opportunities with ShowMax,” said Goldstuck.

Expecting competition from Netflix, which expanded to South Africa in January 2016 as part of its roll-out to 130 countries, Naspers developed its own video on-demand service, ShowMax.

It launched in South Africa in August 2015, and then expanded to the rest of the continent.

Naspers has been aided by the sharp depreciation in South Africa’s currency, the rand.