VODone bet on mobile lottery attracts big investor

PUBLISHED : Tuesday, 16 June, 2009, 12:00am
UPDATED : Tuesday, 16 June, 2009, 12:00am

VODone, a mainland internet video broadcast operator, expects its new mobile lottery business to have more than 3 million users and account for most of its revenue by next year, according to chairman Zhang Lijun.

That rosy outlook has encouraged global institutional asset management firm Och-Ziff to subscribe to 144 million new VODone shares for HK$79.2 million or 55 HK cents each, a 15 per cent discount to the stock's last closing price of 65 HK cents. Och-Ziff, which manages more than US$21 billion of assets, will hold about 10.52 per cent of VODone upon completion of the transaction.

VODone, partly owned by the Ministry of Civil Affairs, reached an agreement with the Heilongjiang Welfare Lottery Centre in April to become one of the first authorised mobile lottery betting service providers in the country.

The deal granted VODone the right to sell lottery tickets, which cost 2 yuan each, to all mobile-telephone subscribers on the mainland.

The company will share part of the revenue with the lottery centre, which sells about 2 billion yuan (HK$2.26 billion) worth of tickets annually through traditional agents and ranks among the country's top 10 in national welfare lottery sales.

Mr Zhang said VODone expected to generate 1 million mobile lottery users by the year-end and 3 million by June next year, a mainland lottery market share of about 5 per cent.

About 20,000 mobile-telephone users have so far downloaded the specific software used to participate in the country's mobile lottery service. Registered users wager through their handsets, with payment directly debited from their bank accounts.

VODone would invest 'tens of million of dollars' on marketing to promote the mobile lottery service, Mr Zhang said, noting that such expenses could easily be covered if each user spent 50 yuan to 100 yuan a month on the service.

'We are sticking with our core online video business,' said Mr Zhang, who pointed out that the mobile lottery business was likely to contribute 60 to 80 per cent of group revenue.

The rest of revenue will come from advertising on its video portals.

The government estimates the number of frequent players of lottery has reached more than 100 million, contributing more than 100 billion yuan of betting turnover every year.

Betting turnover from welfare lottery totalled 60 billion yuan per year.

VODone will provide live coverage of all lottery results through its portal and various video programmes, such as the Expert Lottery Comments channel, to generate additional advertising revenue.

'Mobile lottery has a sound business model and we're exploring other business opportunities involving mobile telephones,' said Mr Zhang.

VODone will launch its mobile television channel later this year on all three of the mainland's mobile network operators.