'Not likely to vie with Apple, Amazon over video'

As large internet companies in the US such as Apple and Amazon aim to increase their presence in video content, Naspers's unbundling of MultiChoice, Africa's largest pay-TV operator, has raised questions about the company's long-term strategy.

Naspers CEO Bob van Dijk says: "Video is a great space and a hugely competitive space with different dynamics depending on where you are in the world. Do we see the [video] landscape as steady? I would say no. Does it provide opportunities? We'll see."

Video is huge in terms of the time that people spend online, he says, adding that "whether or not we will make other investments in video, it's hard to say".

Created by Naspers chair and former CEO Koos Bekker, MultiChoice officially left the nest in February, listing on the JSE after two decades as part of the group.

On the same day that Naspers announced its proposed listing of NewCo - a new entity housing its international assets, in which Naspers will have a 75% shareholding - Apple announced plans to launch a television- and video-streaming subscription service called Apple TV Plus as the iPhone maker continues its search for new revenue streams in a context of shrinking global smartphone sales. NewCo will list on Amsterdam's Euronext exchange this year.

Van Dijk says: "We [already] have a big exposure to video through our investment in Tencent."

Ranked 18th in Forbes's top 100 digital companies in 2018, Tencent - the Chinese internet company worth more than $100bn (R1.4-trillion) - is the world's largest gaming company and a major player in video.

Tencent Pictures is its film distribution and production entity, which has been involved in major films such as 2018's Bumblebee, Wonder Woman and Venom. Tencent Video's streaming service caters to the Chinese market, with close to a billion users.

Philip Short, an analyst at Old Mutual Equities, does not think Naspers will invest in video content or platforms in the current environment as it is unlikely to want to compete with Apple, Netflix or Amazon in an increasingly crowded market.

Some analysts have speculated that Naspers is becoming like Japanese technology-investment giant SoftBank, given its growing portfolio of investments.

SoftBank owes much of its success to the internet boom in China. In 2000, it invested $20m in Alibaba.com, worth about $60bn when Alibaba listed on the New York Stock Exchange 14 years later. Naspers initially paid $32m for its stake in Tencent.

Over time, SoftBank has invested in a number of companies, including more than $2bn in Indian e-commerce giant Flipkart, a company in which Naspers sold its 12% stake for $2.2bn in August last year.

Short says though there are parallels that can be drawn between Naspers and SoftBank as investment companies that are trading at a discount to their net asset values, they have two fundamental differences.

The first has to do with capital gains tax. If SoftBank sold its holdings in Alibaba, for example, this would have greater tax implications than if Naspers sold its stake in Tencent, owing to a better tax structure.

The second difference is that "SoftBank has a huge pile of debt" whereas Naspers is in a cash-positive position.

Thus SoftBank trades at a much higher discount relative to Naspers.

With investments in companies such as Uber and WeWork, SoftBank has embarked on an ambitious investment drive with its $100bn Vision Fund to invest in technology businesses globally.

"It's other people's money," says Short, adding that the fund, comprising a number of investors, does not absolve SoftBank of its debt.

Over the years, Naspers has tended to invest in emerging markets, having a substantial presence in Russia and India, though it has ventured into the US by investing $500m in letgo, an e-commerce start-up that allows users to buy and sell second-hand goods.

Short calls Naspers's investment philosophy "opportunistic", saying the company is not exclusively an emerging-markets investor. "The opportunities are more present in emerging markets, hence they have invested there."

Naspers's Africa business is primarily SA-based and analysts are also doubtful that the company will invest in the rest of Africa.

"There has to be good internet infrastructure," says Short, adding that Naspers tends to invest in markets with highly developed internet usage.

Though access is on the rise in Africa, the quality of connections may be poor in some parts. The growth of fast internet is why Naspers has focused so much on China and India over the years.