News Corporation explores sale of Jamba mobile content business

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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News Corporation is exploring the sale of mobile content business Jamba, a source familiar with the company and three venture capital investors told mergermarket.

Jamba — known in the US as ”Jamster” — is a mobile content provider based in Berlin, Germany. The New York-based media company acquired a 51% stake in Jamster from VeriSign for USD 188m in 2006 and paid USD 193m in cash for the remaining stake in October 2008.

News Corp, which declined comment for this story, has divested a series of digital media businesses in recent months, including Photobucket and Rotten Tomatoes. It wants to concentrate its digital business around MySpace and compete more aggressively with Facebook, while focusing its content efforts on premium offerings, the source said. News Corp has hired former CBS Interactive executive Quincy Smith’s new advisory firm, Code Advisors, to work on an undisclosed project for MySpace following the departure of its CEO, Owen Van Natta, on 10 February, a second source familiar with News Corp said.

Spanish digital entertainment company Zed is a likely buyer for Jamster, a banker and an industry executive said. Zed currently lacks a strong US presence and Jamster could provide a way of breaking into this market. Other potential buyers include the Italian mobile media company Buongiorno; Flycell, a part of the Italian mobile-messaging company Acotel Group; and Dada.net, a mobile music company in which Sony Music owns a minority stake.

Buongiorno, however, has been rumored to be looking for a buyer for some time, and with few buyers out there, it is unlikely to bid for Jamster, a second banker said.

Large European carriers such as Vodafone, Telefonica and Telecom Italia are all possible buyers as well, the two bankers added.

News Corp initially purchased Jamster to leverage Fox’s brands such as The Simpsons and Family Guy, thereby providing exclusivity from other mobile content providers, the executive said. Recent industry buzz that Jamster is licensing its mobile content to third parties indicate that Fox is looking to determine whether its licenses are worth holding on to, the executive added.

Revenues for News Corp’s ”Other” segment, which includes the Fox Mobile Entertainment unit that Jamster is a part of, dropped 20% to USD 2.4bn for the fiscal year ended 30 June 2009 compared with USD 3bn in the previous year. Operating losses at News Corp’s ”Other” segment deepened to USD 363m from USD 84m over the same period, according to filings.

The second banker said that although the sector has grown, the dynamics have changed, making it a more challenging market than when News Corp acquired it. “App stores are taking all the value,” he said. For this reason, it would be difficult for News Corp to achieve the same valuation it bought Jamster for, he said.

The business may have declined recently due to difficulty with leveraging MySpace to drive traffic to Jamster, the executive added. When News Corp purchased Jamster, it believed it could cut costs by eliminating marketing spend, and integrate the mobile content company with MySpace. Now that MySpace is seeing sluggish growth, Jamster may be as well, he said.

Asked about the future of MySpace, the first source familiar with News Corp said CEO Rupert Murdoch has resisted letting go of the business because such a move would be seen as capitulating in the online social media market. However, the business has a price tag, so its fate will also depend on whether a buyer puts down an attractive offer. A third banker estimated the social network’s value at between USD 500m and USD 1bn.

News Corp retained JP Morgan in 2008 to purchase VeriSign’s stake in Jamster.

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