Tencent Holdings Limited, China's largest instant messaging (IM) service provider, said Monday it would become listed on the Hong Kong Stock Exchange and issue more than 420 million shares to investors, amid an initial public offering (IPO) wave from Chinese Internet companies.

Tencent said Monday in a statement that it would sell 378 million shares in an international offering and 43 million shares to public investors in Hong Kong, which equals about a quarter of its total share capital.

The share price will be between HK$2.77 (36 US cents) and HK$3.70 (47 US cents), and will be finalized on Friday.

The Shenzhen-based firm is expected to raise HK$1.16 billion (US$149 million) to HK$1.55 billion (US$199 million) from the IPO.

The trading of Tencent stocks will start on Wednesday next week.

The company still has a greenshoe option to sell another 63 million shares in addition to the 420 million.

Wallace Cheung, an analyst of DBS Vickers (Hong Kong) Ltd, said he believed the Tencent IPO would be attractive to investors.

He said Tencent has a stronger brand than most of the Internet and mobile service providers on the Chinese mainland, such as NASDAQ-listed Tom Online and Linktone.

"That will be a big entry barrier for other competitors," said Cheung.

Tencent said in its prospectus that it had 291 million registered users, including 97.1 million active accounts, at the end of March.

According to a survey of more than 10,000 IM users by market research house Shanghai iResearch Co Ltd, 74 percent of the respondents use Tencent's QQ, far more than competitors like Microsoft's Messenger, Popo of the NASDAQ-listed Chinese Internet company Netease Inc, and Yahoo! Messenger.

The dominant position of Tencent in the online communications market has driven the company into fast growth in recent years.

Its revenues and profits stood at 735 million yuan (US$88.77 million) and 322.2 million yuan (US$38.89 million) by the end of 2003, growing 179 percent and 124 percent respectively from the previous year.

Internet-based services, mobile value-added services, and online advertising contributed to 31.3 percent, 63.6 percent and 4.5 percent of Tencent's total in 2003.

Cheung said he believed that the IPO of Tencent would give another channel offering options to its employees and stimulating their loyalty to the company, as well to have more ammunition in reserve for strategic expansion.

The company plans to use HK$818 million (US$105 million) out of the HK$1.26 billion (US$162 million) net proceeds calculated at the middle of its IPO pricing range -HK$3.235 (41 US cents) - for strategic acquisitions.

South Africa-based media group Naspers with 37.5 percent of Tencent and Ma Huateng, its chief executive officer, with 14.43 percent, are the company's two top shareholders.

Tencent's IPOs just one of the many Chinese Internet and mobile service companies waiting to be listed on stock exchanges.

Beijing-based mobile value-added service operators Mtone and Kongzhong have both filed with NASDAQ for IPOs.

Baidu.com, a search engine provider in Beijing, is also tipped to make an IPO on the NASDAQ in the third quarter.

(China Daily June 8, 2004)