Legend buys 49 percent stake held by Time Warner

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Last updated at: (Beijing Time) Thursday, January 08, 2004

Legend buys 49 percent stake held by Time Warner

Legend Group Ltd, China's largest computer maker, said Wednesday that it has bought a 49 percent stake held by Time Warner, formerly AOL Time Warner Inc, in their Internet joint venture.

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Legend Group Ltd, China's largest computer maker, said Wednesday that it has bought a 49 percent stake held by Time Warner, formerly AOL Time Warner Inc, in their Internet joint venture.

The purchase means the Beijing-based company has ended its partnership with the world's leading media firm.

The New York-based company withdrew from the US$50 million venture, FM365, because of its myopic business sense, which made it lose many opportunities such as the short message service, according to industry insiders.

"We ended the partnership with AOL in December through purchasing the remaining stake of the joint venture," a Legend official, who declined to be identified, said yesterday.

Two years ago, AOL (America Online) and Legend established the joint venture with each partner planning to contribute US$100 million. Legend held 51 percent of the stake and AOL had the remainder.

The two companies had invested US$25 million each already.

Ma Xuezheng, Legend's chief financial officer, declined to reveal how much Legend paid to buy the 49 percent stake.

Ma added that the company, which now owns the venture wholly, does not need to take a one-time charge for the purchase as Bloomberg reported.

Time Warner was not available for comment yesterday.

The venture planned to offer broadband Internet access to customers in China through AOL software installed in Legend computers. But it was an unprofitable business due to the high price of broadband access then, and it did not meet the companies' expectation.

"In the period, other Internet companies boosted their revenue through short message business, content providing service and online games. But the joint venture missed those opportunities," said an unidentified industry observer, who has been in the Internet industry for five years.

"No one realized five years ago what would happen in the telecommunications market," Ma said.

Following Time Warner's withdrawal last month, Legend signed an agreement to install software on its computers allowing access to the broadband Internet services of China Telecommunications Corp, the country's largest fixed-line phone firm.

The observer said Legend will probably sell the current wholly-owned venture or just give it up in future.

Besides giving up the venture with Legend, Time Warner has also pulled out from the media and Internet assets in China that it invested in 2000 and 2001 because they didn't meet expectations.

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