Tencent buys stake in travel agency eLong

PUBLISHED : Wednesday, 18 May, 2011, 12:00am
UPDATED : Wednesday, 18 May, 2011, 12:00am


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Tencent Holdings, the mainland's largest internet company, is expanding into the online travel industry after acquiring a 16 per cent stake in domestic provider eLong.

The Shenzhen-based company said yesterday that it paid US$84.4 million for about 11 million newly issued shares to become the second-largest shareholder in eLong after Expedia, the world's biggest online travel services business.

It is the first strategic investment in the online travel business for Tencent, which has a market capitalisation of HK$391.65 billion. The Hong Kong-listed firm is already well-entrenched as the mainland's leading provider of online gaming, instant messaging, social networking and mobile value-added services.

The eLong deal also marks the initial round of strategic spending promised by chairman and chief executive Pony Ma Huateng to grow Tencent's operations in key online areas such as e-commerce, micro-blog, search and security.

The company plans to develop offerings that will allow its online community of about 647 million 'QQ' user accounts to tap into eLong's portfolio of more than 150,000 hotel properties worldwide, including 19,200 hotels on the mainland.

'We believe consumers throughout China will benefit from this partnership, while eLong and Expedia [hotel and travel services] partners enjoy significant new access to internet traffic and young customers in China,' eLong chief executive Cui Guangfu said.

Expedia yesterday joined Tencent in investing in eLong by buying an additional 8 per cent stake, or 5.4 million newly issued shares, in the company for US$41.2 million, boosting the United States-based firm's total shareholding to 56 per cent.

Beijing-based eLong said it would use the proceeds for acquisitions, business development, working capital and other general corporate purposes.

Market analyst iResearch estimated that International remained the mainland's leading online travel services provider with a 47.3 per cent share in the first quarter, compared with second-ranked eLong's 7.5 per cent share.

Nasdaq-listed eLong yesterday reported a 30 per cent rise in first-quarter net profit to 7.7 million yuan (HK$9.2 million), from 5.9 million yuan a year earlier, due to strong growth in online hotel bookings.

'We expect our hotel online bookings will for the first time exceed our call-centre bookings in the second quarter,' Cui said.

The company saw its total first-quarter net revenue, excluding business tax and other surcharges, climb 23 per cent to 124.5 million yuan.

It forecast second-quarter revenue to range between 137 million yuan and 149 million yuan, equivalent to a year-on-year increase of between 15 per cent and 25 per cent.