South Africa: Naspers Interim Profit Rises As Competition Looms in Pay-TV

Investment

Media giant Naspers has improved its performance in the six months to September, while preparing for competition in the pay-TV arena. With new pay-TV licencees expected to enter the South African market next year, Naspers has ramped up its total subscriber figures by 109000, and subscribers on its South African platform DStv by more than 80000 over the six-month period .

The company said yesterday this gave it a total of 1.47-million subscribers in SA. The company's electronic media business boosted earnings 21% to R6,4bn from R5,2bn in the comparable 2006 period. Overall core headline earnings grew 32% to R1,74bn, while profit after tax was R1,94bn, up from the R891m.

Cadiz African Harvest portfolio manager Rajay Ambekar said pay-TV subscriber growth had been "most interesting". He said while the subscriber base had grown, the costs of pay-TV did not necessarily increase.

He said it was worth noting that pay-TV advertising revenue was growing faster than print media.

"While overall ad revenue increased 15%, 20% of the growth had come from pay-TV and 12% from print," he said. "I still think that competition will not have too dramatic an effect on the company."

Naspers has rolled out new pay-TV products and services, including lower-cost offerings. The market value of its listed investments nearly doubled, from R15bn at the end of the financial year in March, to R28bn in September.

"This has been largely off the back of our investment in Chinese company Tencent," said Naspers chief financial officer Steve Pacak.

The share price of Hong-Kong listed Tencent had risen from HK$30 to HK$50 in the past six months. The company had grown its "active" user base to 289-million -- making it the largest online community in China, contributing R218m to the group's core headline earnings, Pacak said.

Print media advertising revenue slowed from 22% in the comparable period to 12%. Naspers warned that this would continue.

Hein Brand, CEO of Media24, a Naspers subsidiary, said SA had experienced an "unbelievable run", but this would not be the case in the future.

He said the focus would now move away from increasing market share in print media by launching new titles, and focusing on improving margins instead.

The company acquired Kenyan internet service provider Afsat in October, forming part of the R2,1bn worth of acquisitions. It also increased its shareholding in Russian internet company mail.ru for $26m and made an offer to buy Polish instant-messaging service Gadu-Gadu for an expected $155m.

(Business Day (Johannesburg), 28 November 2007)