Advertisment among top Asian portals: Merrill

CIOL Bureau
Updated On
New Update

MUMBAI: Merrill Lynch has picked leading India-focused Internet portal as its third top Asian Internet recommendation. The brokerage expects

Rediff to become the first Asian portal to break even. In its weekly

Internet-sector research report, Merrill analysts Matei Mihalca and David Cui

cited Rediff's better than expected October-December results, its strong cash

position, a growing Indian online advertising market and cheaper Internet access

as reasons for the selection.


Korea's Internet Auction and Hong Kong-based Chinadotcom are its top two

recommendations in the Asia-Pacific region excluding Japan and Australia.

"Growing lower fee and even fee-free Internet access in India favor Rediff,

as they bring more people online," the report said.

India's advertising market is also in better shape than most global markets,

with TV broadcasters reporting 15-20 per cent year-on-year growth, it said. The

share of online advertising from consumer goods, automobiles and insurance

companies was also on the rise in India, it said.

Rediff's page views soared to 670 million in the October-December period, up

69 per cent from the previous quarter. Net revenue rose 31 per cent to $1.75

million, while the proportion from dotcoms declined to 30 per cent from 47 per

cent. Its operating loss narrowed to $1.5 million from $2.09 million in the

previous quarter.


Rediff also has $57 million in cash which Merrill expects will last for over

seven years. Merrill is bullish about Rediff's plans to increase non-advertising

income and estimates its revenue to grow at 22 per cent quarter-on-quarter to

$2.15 million in the January-March quarter and $2.62 million in the next.

"Even on our current conservative numbers, Rediff would be the first

Asian portal to achieve breakeven by end-2001 (significantly ahead of and," it said.


Indian Internet sector mixed

Merrill feels India, along with China and Korea, are Asia's most important
Internet markets in the long-term. It estimates the number of Internet users in

India to rise seven-fold to 44 million by 2003, up from 5.5 million now. But

trends in the Internet market augur for mixed forecasts for India's Nasdaq-listed

Internet companies, and Satyam Infoway, it said.

Satyam Infoway, majority owned by India's fourth-largest software exporter

Satyam Computer Services, is India's second-largest Internet Service Provider

and also runs a portal, besides offering Web solutions. While Merrill remains

bullish about Satyam Infoway's portal and Web solutions prospects, it is worried

about the impact of lower Internet access pricing on its revenue.

"We believed that as venture capital funding dropped and brash new

entrants suffered, pricing power would return to leading private players such as

Satyam Infoway," Merrill said. But increasing competition from

state-monopoly Videsh Sanchar Nigam Ltd., India's largest Internet Service

Provider which now has a national license and is offering free night-time

access, does not augur well for access pricing, it said.


Merrill has lowered Satyam Infoway's revenue estimate for the current

financial year by 17.7 per cent and for the next year by 15.1 per cent. And it

has pushed back Satyam's EBITDA (earnings before interest, tax, depreciation and

amortization) breakeven point by two quarters to October-December 2001.

Lower access pricing should benefit, Merrill said.

(C) Reuters Limited 2001.