Just a week after announcing that its revenue would be greatly impacted by new anti-pornography wireless messaging rules in China, Chinese wireless-value added services firm KongZhong Corporation has now announced a deal to pay up to USD80 million for a Chinese online game company.
KongZhong has entered into a definitive agreement to acquire Shanghai Dacheng Network Technology Company Ltd., a developer of 3D massively multi-player online role-playing games. Based on Dacheng's 2010 net profit after tax, as calculated under US GAAP, KongZhong would pay up to USD80.0 million, in a mix of cash and the company's ordinary shares, to Dacheng's shareholders. KongZhong expects that the transaction will close in the first quarter of 2010.
"With the strong performance of Dacheng's newest 3D online game, Loong, Dacheng is becoming one of China's leading 3D online game developers," said Jay Chang, the chief financial officer of KongZhong.
On November 30, 2009, in order to support the Chinese government's efforts to maintain an orderly mobile Internet environment, China Mobile implemented a series of measures targeted at eliminating offensive or unauthorized content, including pornographic content, on Chinese-based wireless application protocol sites. As a result, China Mobile and other Chinese telecommunications operators have suspended billing their customers for all WAP and G+ mobile gaming platform services, including those services that do not contain offensive or unauthorized content, on behalf of third party service providers of such services. KongZhong expects that the measures will impact the KongZhong's WAP and wireless Internet services and a portion of the company's mobile game services, as well as the revenues derived from such services. Based on the company's current assessment of these measures, KongZhong now expects its revenues in the fourth quarter of 2009 to be within the range of USD34.0 million to USD35.0 million, as compared to its previous guidance range of USD37.0 million to USD38.0 million.