VODone Ltd, a Chinese online video portal, announced Thursday that it will buy a majority stake in a domestic mobile game developer, in order to break into the smartphone games market.
VODone and its investment subsidiary Action King signed the formal agreement with the major shareholders of 3GUU, a mobile game developer and operator, VODone said in a statement filed with the Hong Kong Stock Exchange Thursday. VODone will acquire 70 percent of the issued shared capital of 3GUU for HK$229.32 million ($29.47 million).
Guangzhou-based 3GUU develops mobile games for smartphones, using operating systems such as Apple's iOS and Google's Android.
Prior to the acquisition, VODone relied on its subsidiary, Dragon Joyce Group, to develop mobile games based on Chinese-brand mobile chipset platforms including MTK, Spectrum and Mstar.
The acquisition indicates that the online video portal sees significant growth potential in the mobile game market, expected to be a growth engine for wireless mobile network players, said Shen Zheyi, research director in the mobile devices and consumer services group at research firm Gartner in Shanghai.
China's rapidly growing market for 3G terminal equipment, such as smartphones and tablet PCs, will drive mobile game growth, said Zheng Jiyou, an industry analyst with Huarong Securities in Beijing.
China's 3G subscribers have climbed to 40 million, according to Zheng. The Ministry of Industry and Information Technology said earlier this year that 3G subscribers could reach more than 150 million by the end of 2011.
Analysts pointed out that the market is likely to consolidate, with major players endeavoring to secure their position in the market while some smaller rivals are forced to exit.
"Currently, only top-ranking games can make money, because not many users are will-ing to pay for them," Shen said. Competition in the market has intensified, and consolidation is unavoidable, she believes.
"Firms like VODone with strong cashflow will jump on the acquisition bandwagon," Zheng said. "It is the easiest way for them to boost their software development power."
Last week, Chengdu B-ray Media Co announced its intention to take over the Shanghai Chenyan Information Technology Co, a software developer whose mobile games are available from Apple's App Store.
Shares of VODone closed at HK$2.43 ($0.31) Thursday, unchanged from the previous day.
