E-Game to sell stake in Netopia operator

With the proliferation of tablets, affordable smartphones and free Wi-Fi, the internet cafe business is no longer viable these days.

Thus, publicly listed IP E-Game Ventures Inc. (EG), an interactive gaming and content distributor, disclosed to the Philippine Stock Exchange on Wednesday that it was selling its 48.38-percent stake in Digital Paradise Inc. (DPI), operator of Netopia-branded internet cafes.

“In the last few years, DPI’s internet business has been in a state of steady decline,” EG said, adding that several consumer trends showed that the “negative trends in the internet café will be hard to reverse.”

At its peak around 2006, DPI operated almost 180 internet cafes in the Philippines. By the fourth quarter of 2018, the number was down to 14.

Specifically, EG noted the increase in locations offering free Wi-Fi, the proliferation of portable gaming devices; and shift in consumer use of mobile devices as a result of an improving economy that allows more people to acquire mobile devices. Furthermore, it noted that technological innovations had increased consumer reliance on mobile devices.

These factors have “caused a significant reduction in the demand for internet cafes, and a downward trend in DPI’s sales, transactions per store and number of stores—all of which justify the issuer’s exit from this industry,” the disclosure said.

EG issued a deed of assignment covering 62.928 million DPI shares to Y-Fi Business Solutions Inc. valued at P62.928 million equivalent to the par value of P1 per share.

“The use of par value as basis for sale price was driven by demand. There were no other buyers willing to acquire the shares for a higher value given its financial performance the year prior to the divestment,” the disclosure said.

EG acquired 75 percent of DPI from ePLDT in 2011 for P145 million or P1.49 per share.

EG is now selling a portion of the stake to Y-Fi Business Solutions, which is chaired by Jaime Enrique Gonzalez, who is also president and chief executive officer of EG.