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December 17, 2009

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Gaming for a takeover deal

NASDAQ-LISTED wireless service firm KongZhong Corp announced yesterday it would acquire a Shanghai-based online game firm for up to US$80 million to expand its business to the booming online game industry.

The acquisition was disclosed a week after Beijing-based KongZhong said its wireless service income would be affected by the Chinese government's announcement that it would fight against the easy availability of pornography on mobile phones, according to analysts.

KongZhong will acquire Dacheng Network for up to US$80 million in cash and shares. The transaction is expected to complete in the first quarter of 2010, the company said. KongZhong will complete the acquisition by paying 62.42 percent of the deal value with shares and 37.58 percent with cash. The deal value will be based on Dacheng's 2010 fiscal year net profit.

"We are glad to expand the business into the online game sector and we will explore the business model, including both online and mobile games," Wang Leilei, KongZhong's chief executive, said in a statement.

Dacheng has a six-year history in the online game industry and can develop 3D massively multi-player online role-playing games, such as Loong, which will start open beta testing in two weeks. Dacheng-developed games are also played in overseas markets including the United States and South Korea.

China's online game revenue is set to hit 26 billion yuan (US$3.8 billion) this year, a 43 percent jump from last year, Beijing-based research firm Analysys International said.

By comparison, its wireless value-added service revenue rose only 17 percent annually to 39.2 billion yuan in the third quarter, against a 40 percent growth in the same period last year, said iResearch Inc, a Shanghai-based Internet consulting firm. Since November, China has started a campaign to fight against pornographic content on mobile Websites. KongZhong last week revised downward fourth-quarter revenue to between US$34 million to US$35 million.



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