Tencent In EA Tie-Up As Ma Tops Rich List
Online gaming giant Tencent (HKEx: 700) is making headlines today on a couple of fronts, with founder Pony Ma officially becoming China’s richest man as the company has also signed a major new licensing deal with US game developer Electronic Arts (EA) (Nasdaq: EA). The former development reflects the meteoric rise of Tencent over the last decade, as it leveraged its popular original QQ instant messaging platform to become China’s dominant online game and social networking company. Meantime, the new EA tie-up provides the latest evidence that Tencent is trying to diversify beyond its previous alliance with US game development giant Activision Blizzard (Nasdaq: ATVI), as part of Tencent’s bigger globalization drive.
Ma’s topping of the rich list shouldn’t come as a huge surprise, as Tencent’s stock has soared meteorically since the company’s listing in Hong Kong about a decade ago. Anyone who was lucky enough to buy the stock back then would have reaped huge returns, as the shares now trade at about HK$330, or nearly 100 times their original IPO price of HK$3.70.
The low-key Pony Ma has seen his personal fortune soar with the company’s stock, and he now is personally worth 46.7 billion yuan, or about $7.5 billion, according to a newly published ranking by a Chinese publication called Moneyweek. (Chinese article) One Chinese media article noted that on Ma’s arrival at the top of the list came just as Tencent’s popular WeChat mobile instant messaging service experienced one of its first major outages, caused by technical reasons, in a potentially ominous sign.
Ma’s rise to the top of the list is largely symbolic, and it’s quite possible he could soon be replaced by Jack Ma, the equally wealth founder of leading e-commerce site Alibaba. Ma’s current wealth is less clear since Alibaba is a private company; but that will soon change as Alibaba gets set for a blockbuster IPO potentially later this year, which should easily become the biggest Internet public offering ever by a Chinese firm.
Ma’s meteoric rise means that Tencent will inevitably attract lots of attention from rivals, both business and political, which could also challenge his personal fortune. The company has engaged in recent clashes with dominant mobile carrier China Mobile (HKEx: 941; NYSE: CHL) and security software specialist Qihoo (NYSE: QIHU), just to name a few, and is likely to attract more attention from envious rivals. But right now Ma’s position looks relatively secure, as we haven’t seen any signs of political troubles yet.
The second headline has Tencent announcing a new licensing agreement for EA’s FIFA Online 3 soccer title. (company announcement) Tencent will have exclusive rights to the popular title in China, and will begin trialing the game in the fourth quarter.
From a broader perspective, this new tie-up seems to indicate that Tencent plans to diversify its foreign partnerships as it seeks to become a more international company. The company formed a major strategic tie-up with Activision Blizzard last year, and reports at the time indicated Tencent might even be interested in buying the US game publishing giant that was being shopped around by its parent Vivendi.
But an Activision sale has yet to occur, and a new Activision deal earlier this month with rival Chinese game operator NetEase (Nasdaq: NTES) led me to conclude that the original Tencent-Activision strategic tie-up wasn’t as strong as the 2 sides had previously hoped. This new EA tie-up would seem to reinforce the view that Tencent will form partnerships with many of the world’s leading game developers, as part of its globalization strategy. Accordingly, we could see more such licensing deals, with Tencent potentially using such partnerships to eventually expand into other markets outside of China.
Bottom line: Pony Ma looks set to retain his spot as one of China’s richest men for a while, as Tencent embarks on a globalization drive that includes new tie-ups with foreign partners.
