Is this flurry of acquisitions a savvy move by management to increase the reach of their advertising platform with its’ richly valued shares and a sign of slowing growth in Focus Media’s core business of out of home advertising? Or does Focus Media see value in a sector that has seen its’ fair share of hard times?
One point of interest is that Focus Media doesn’t seem to be going after the bigger stand alone names in the WVAS space like Kong Zhong (KONG), Hurray or Linktone (LTON) who all have seen rough times recently but instead they seem to be going after smaller players who might be a better fit into their strategic development plans.
If Focus Media were to complete these acquisitions in the WVAS space, it would seem that they are attempting to create an integrated advertising platform covering China’s most rapidly growing media segments: out of home media , internet and mobile. While increasing their overall inventory it would also create a very appealing network for major advertisers who would be able to run a very tightly integrated campaign across multiple media channels.
We’ll have to wait and see if Focus Media actually completes these acquisitions as well as if this an attempt to further extend their advertising platform or whether this is actually a direct foray into the WVAS space. Although we would be surprised if FMCN were to directly enter the WVAS space, if that was the case it would be a good reason to consider taking a second look at some of the players in the WVAS space. Maybe Focus Media knows something that the general investing public doesn’t know. After years of a tough regulatory environment and tenuous relationships with the China Mobile (CHL) and Unicom (CHU) things might be ready to finally turn around. But we wouldn’t bet on it.
Disclosure: Author has no position in any of the above-mentioned securities.