Tencent's Dianping investment is credit positive: Moody's

Tencent's acquisition of 20 percent equity in China's lifestyle and group buying website Dianping.com is credit positive, Moody's Investors Service said Friday in a statement.

Tencent, listed in Hong Kong, announced on Wednesday that it had purchased 20 percent of Dianping.com. The two companies will integrate Dianping's content, user base and offline retailer network with Tencent's social communications platforms, such as QQ and Wechat, to build an online-to-offline service.

Tencent did not disclose the cost of the transaction, but China Business News reported on Monday that the company had paid $400 million.

Tencent is one of the largest providers of Internet services in China. It operates leading social networking services, online portals and online game platforms -- generating 44 billion yuan ($7.2 billion) in revenue in 2012.

Dianping.com is one of China's largest providers of online information on local lifestyle including restaurants ratings and reviews, group buying, and take-out ordering services.

"Because the investment in Dianping enhances Tencent's product offerings and reinforces the user stickiness of its platforms, it is a positive step towards Tencent's further monetization of its online applications," said Moody's senior analyst Lina Choi.

Moody's said Tencent can direct its large user base towards Dianping's website and applications, thereby promoting the latter's information services, such as restaurant listings.

In addition, Tencent's online payment solution - available on the Wechat application - can facilitate transactions when users spend at the recommended restaurants, Moody's said.

"Moreover, Dianping will provide Tencent data on user preferences and consumption patterns, which in turn will lead to other sources of revenue such as targeted advertising," Choi added.

The investment in Dianping is the latest in a series of investments that Tencent has made in the last 12 months, in an attempt to build a comprehensive platform that encourages its large online user base to access offline information and make purchases.

In December of 2013, Tencent invested in Didi Taxi, a taxi reservation service. Earlier this month, Tencent reached a cooperation agreement with Beijing Wangfujing Department Store, to leverage its online traffic to promote offline purchases.

"Tencent can fund the investment in Dianping from its internal financial resources. Because there is no need to raise debt, the investment will have no impact on Tencent's Baa1 issuer rating and positive outlook," Choi said.