Tencent to buy stake in lottery tech firm

Tencent Holdings, a major domestic Internet company, plans to acquire a stake in a Hong Kong-listed lottery technology and equipment provider to further its presence in China's booming online lottery arena, domestic news portal cb.com.cn reported Wednesday.

Unnamed sources close to the matter were quoted by the report as saying that the major shareholders of China LotSynergy Holdings (CLS), Chen Cheng and Liu Ting, are actively negotiating with Tencent which is expected to become the largest shareholder of CLS.

The value of CLS estimated by Tencent ranges from HK$11.9 billion ($1.54 billion) to HK$15.8 billion, said the report.

The final agreement is set to be reached on Tuesday, according to the sources.

PR representatives with Tencent told the Global Times Wednesday that the company refused to comment on this. Phone calls and e-mails to CLS were unanswered by press time.

This possible transaction is likely to strengthen Tencent's lottery distribution on the mobile front, given CLS' experience in providing tech services for telephone distribution of lotteries, said Li Zichuan, an industry analyst with Analysys International.

In January, the company announced cooperation with China Mobile, enabling users of the country's largest telecom operators to read lottery-related information and buy lottery tickets via mobile applications developed by the CLS.

The deal can also be a benefit to CLS, which can access Tencent's online platforms and then promote its online lottery services, Li told the Global Times on Wednesday.

The share price of CLS closed at HK$0.81 Wednesday, a surge of 17.39 percent. According to a filing posted on the Hong Kong bourse, the company said that it does not know the reason for the surge.

China's online lottery distributors including Tencent, Alibaba and caipiao365.com are betting on mobile Internet.

Mobile apps are gradually becoming Chinese consumers' preferred channel to purchase lotteries online, in comparison with PCs, Li said.

A report issued by Beijing-based lottery market research company Caitong Consulting in May estimates that this year China will see 18 billion yuan ($2.88 billion) in lottery tickets sold from mobile devices, up 102.2 percent year-on-year. In 2015, sales will reach 32 billion yuan, according to the report.

A report released by Analysys International in mid-May indicated that Alibaba's lottery online platform caipiao.taobao.com ranked second in the mobile segment by sales volume with 20.1 percent in the first quarter of this year.

Caipiao365.com, owned by the Ministry of Civil Affairs, led the market with 23.1 percent, thanks to its active marketing activities, said the Analysys International. Tencent came in sixth with 6.7 percent.

Tencent has the chance to surpass Alibaba and caipiao365.com as long as it can take full advantage of its large mobile user base amassed via the popular instant messaging app WeChat, said Li.

But like many other online lottery distributers, Tencent faces uncertainty over policy, according to Li.

"The government approved the online lottery sales in 2010, but is expected to issue licenses later this year. Everyone is waiting for the official license to sell lotteries on PCs and mobile apps legally," he said. "But not all of the companies can obtain it."