Shanda Games Ltd. (GAME)
Q2 2013 Earnings Conference Call
July 28, 2013 10:00 PM ET
Ellen Chiu – Investor Relations Director
Xiangdong Zhang – Chief Executive Officer
Richard Wei – Chief Financial Officer
George Meng – Macquarie Securities
William Hill – Barclays Capital Inc.
Thomas Chong – BOCI Research Limited
Jia Long Shi – CLSA Research Ltd.
William Huang – Barclays Capital
Previous Statements by GAME
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I would now like to turn the call over to Ellen Chiu, Shanda Games’ Investor Relations Director. Please proceed, ma’am.
Thank you. Good morning and good evening, everyone. On behalf of Shanda Games, I would like to welcome everyone to our conference call to discuss Shanda Games planned acquisition of its platform-related affiliates, which was announced earlier. With me today are Mr. Xiangdong Zhang, our CEO; and Mr. Richard Wei, our CFO.
Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations, and are intended to qualify for the Safe Harbor liability for such statements established in the US Private Securities Litigation Reform Act of 1995. Statement in the announcement are not historical fact, including but not limited to statements regarding the future benefits brought by the acquisition of Shengzhan and Shengjing, represent only the Company’s current expectations, assumptions, estimates and projections and are forward-looking statements. These forward-looking statements involve various risks and uncertainties. Important risks and uncertainties that could cause the Company’s actual results to be materially different from expectations including but not limited to the possibility by the company was not realized the expected benefits or synergies from the acquisition of Shengzhan and Shengjing.
With that, let me turn the call over to our CEO, Mr. Xiangdong Zhang.
Thank you, Ellen, and thank you all for joining us today. We’re happy to announce the acquisition of User Entertainment platform businesses, which are currently operated by our affiliates Shengzhan and Shengjing to strengthen our mobile strategy.
Shengzhan and Shengjing are both entities under the common control of Shanda Interactive. Shanda Games pays service fees to them for services include RMB billing, user authentic patient, customer service, and free kick compliance, data support services, and prepaid card marketing and distribution.
Shengzhan owns the Shanda Pass database which contains account information, including registration, payment and other user-behavior data that gamers use to access games operated by Shanda Games. Shanda also like experienced customer service team which handles approximately nine million interactions with game users per month on average.
The customer service team was awarded the Best Call Center in China for eight consecutive years from 2005 to 2012 and have received a five-star certification from International Customer Management Institute. Shengjing owns approximately 180,000 prepaid card distribution channels nationwide, through which over two million real and virtual prepaid cards were sold monthly on average. Shanda Games will become a truly integrated online gaming company.
Through this transaction, we look forward in strengthening on our business both strategically and financially. The acquisition is a strong step forward in strengthening our mobile business, which now forms an integral part of our strategy. For mobile games, platforms play a more important role than each individual game as mobile games tend to be smaller in scale and with shorter lifecycle than MMO games. Combining our cumulative expertise and resources in the online gaming industry, we will leverage the customer database and distribution channels operated by Shengzhan and Shengjing to build a consolidated mobile game platform.
This month we launched the mobile game Million Arthur in China which has become extremely (inaudible) corporation was third party mobile platforms which promotes the game through our extensive marketing efforts and our own operating platforms. Million Arthur successes demonstrated the strength and great value of platforms of Shengjing and Shengjing. We believe this transaction will bring us key components to establish our mobile platform. After further integrating our businesses, we plan to release the renewed and refined mobile strategy and products in the near term.
In addition, the transaction improves our cost structure and expected to increase our EPS by approximately 40% to 50%. Meanwhile, it puts our large cash relation to a better use and substantially reduced related-party transactions and loans. More importantly, in-house customer service team and the control of customer database and distribution channels will enable us to enhance game players’ experience and to reach out the user more efficiently.
In closing, we are excited to announce a deal and believes these are big share for Shanda Games. This acquisition of also as a tremendous opportunity to improve our earnings and integrated results. We believe this transaction will bring us synergy to our cash accelerated growth in our business especially in mobile game business.
With that, I’d like to conclude my remarks, and I’ll turn the call to Ellen.
Thank you Xiangdong. We will now take your questions. Operator, please go ahead.
Thank you. Ladies and gentlemen, we’ll now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of George Meng from Macquarie. Please ask your question.