UPDATE 1-Internet sales overtake pay television at South Africa's Naspers

Tue Jun 25, 2013 9:16am EDT

* Core earnings up 20 percent

* Weaker rand boosts offshore earnings

* Dividend up 15 percent

By Helen Nyambura-Mwaura

JOHANNESBURG, June 25 (Reuters) - South African media group Naspers' Internet division has overtaken pay television as its key revenue driver, it showed in results on Tuesday, when it reported a near 20 percent jump in annual profits.

The company, which started off as an Afrikaans newspaper publisher nearly a century ago, has now diversified to take big stakes in internet cash cows such as China's Tencent, and in Russia's Mail.ru, where the company says it holds a 29 percent stake.

Naspers said it spent $625 million in the year ended March 31 on e-commerce investments in various countries including the Czech Republic, Romania, Poland and India, and could continue growing the business segment for several more years.

"What they are doing is establishing a global internet presence and they seem to be doing it in the right geographies where other large competitors are not present. That is a good strategy," said Reuben Beelders, portfolio manager at Gryphon Asset Management, which holds no Naspers stock.

Revenue from its Internet division - which includes businesses such as online gaming and instant messaging platforms - rose 80 percent last year to 34.6 billion rand, while that from pay television was up 20 percent at 30.3 billion rand.

It bought stakes in Netretail, an online retailer with operations in five countries including Hungary, Slovakia and Slovenia, and in Flipkart, an Indian e-commerce platform.

It also took a shareholding in eMag, a Romanian online retailer, along with other purchases.

But all the acquisitions pushed its e-commerce segment, a unit of the Internet division, into a loss.

"There's quite a few years of development that has to happen so we don't see any profitability in that segment in the aggregate for quite a few years," Chief Financial Officer Steve Pacak told Reuters.

E-COMMERCE ACQUISITIONS

The company increased pay television customers by 1.1 million customers to 6.7 million African households, most of them in South Africa.

Pacak said Naspers has spent around $80 million so far in rolling out digital terrestrial television, which is now available in eight African countries.

Meanwhile the company said it is cutting costs in its print media operations in Brazil, where it wrote down by 2.1 billion rand the value of its Abril business, in which it has a 30 percent stake.

Last year Naspers' core headline earnings per share increased to 2,216 cents from 1,850 cents, boosted by a weaker rand. It had forecast earnings would rise by as much as 25 percent.

In South Africa core headline earnings, which exclude some one-off items, are treated as the main measure of profit.

Naspers' raised its dividend to 385 cents per share from 335 cents.

The share price was up 0.4 percent at 679.49 rand by 1259 GMT, having risen by 25 percent so far this year.

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