Naspers has announced that it is considering de-listing M-Web, citing negative market conditions. It is expected that M-Web investors will be offered Naspers shares in a share swap deal.
Based on current market prices, the offer is expected to have a small effect on Naspers`s number of shares outstanding, as fewer than 4% new Naspers shares are expected to be issued, given relative share values. Details of the offer should be known in the next few weeks.
Brokerage BOE said in a February company report that there was talk in the market that M-Web would have to change its business model under which it would be out of cash by April or May this year.
M-Web management has again referred to the AOL/Time Warner merger as the more effective way of moving the business forward. This would involve Naspers integrating its Internet businesses with its more traditional media businesses.
This was the same reason M-Web used when it blocked access to non M-Web dialup users after the launch of Absa Freemail.
"The Internet has evolved a lot over the past year and it is becoming clear that its value can be better unlocked by offering an integrated service in a simple, transparent way," says M-Web CEO Antonie Roux.
"Mergers abroad show the importance of integrating Internet services with media and subscription services. We intend to do the same by integrating with the M-Group`s subscription and media platforms. In this way, we will be able to expand our subscribers` experience seamlessly to television and other services," he says.
When M-Web blocked its site access, Internet analyst Franca Di Silvestro commented that while one cannot fault the company for following the route of paid-for content in an attempt to reach profitability, the content has to be compelling enough to warrant the price.
"Going the route of AOL might be a sound strategy, but the technology infrastructure must be there to back up the price."
Commenting on the new M-Web business model, the company says the launch of the Absa free service did cause some slowdown in sales in February and March, but few cancellations. Net growth has slowly resumed over the past two weeks, it says.
The future funding requirements of M-Web will be met by Naspers and MultiChoice.
"This time last year, stock markets worldwide were euphoric about the Internet; now they are depressed about any e-business," says Naspers MD Koos Bekker.
"We believe this is unrealistically negative, given the powerful transformation of business being wrought by the new e-technologies. However, these are present market realities and it may be beneficial for existing M-Web shareholders to hold their interest through a more broadly-based media stock like Naspers."
The M-Web share was trading at around R7 in April last year, compared with today`s 145c, which is up 20c or 16% on yesterday`s close. Naspers closed at R27 yesterday, also well off its April 2000 levels of R74.
Da Silvestro also noted the M-Web share is tightly held between Naspers and MIHH, meaning that small investors` feelings would have little effect on the share price.
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