Vodone, a loss-making internet video firm, is guaranteed a...

Vodone, a loss-making internet video firm, is guaranteed a pre-tax profit of more than 171 million yuan (HK$194 million) for the next two years after acquiring a 70 per cent stake in mobile-telephone gaming firm Dragon Joyce Group for 168 million yuan.

As part of the deal, Dragon Joyce agreed to guarantee pre-tax net profit of 13.8 million yuan in the fourth quarter this year, 71.5 million yuan next year and 85.8 million yuan in 2011.

Failure to do so will lead to a cut in the acquisition price.

Vodone posted a net loss of HK$11.3 million in the first half this year, against a net profit of HK$8.9 million a year earlier. Turnover grew 31 per cent to HK$70.4 million.

'Dragon Joyce will profit Vodone in the short, medium and long term,' said Vodone chairman Zhang Lijun. 'There are big changes to Vodone with this acquisition. It will diversify our business from just internet video to mobile gaming. We will have a large mobile phone customer base.'

Dragon Joyce had seven million subscribers using its mobile games, with 1.2 million customer accounts added each month, Zhang said.

It also has an extensive distribution network with more than 300 mainland brand mobile handset manufacturers.

In the first half, the mainland's mobile gaming market grew 39.5 per cent to 520 million yuan, while the global market was US$26.5 billion in 2007, Zhang said.

He hopes to persuade Dragon Joyce's mobile gaming customers to join Vodone's 2.5 million lottery players. 'Lower-income people, housewives and grandmothers tend to play the lottery because they hope to get rich.'

Vodone was authorised by the Welfare Lottery Centre of Heilongjiang province in April to offer mobile lottery services with an initial term of 96 months.

Vodone is partly owned by the Ministry of Civil Affairs, which overseas the China Welfare Lottery Issuance Centre. The lotteries raise funds for social welfare programmes.