August 7, 2014, 1:21 PM

Rocket Internet raises $445 million to invest in mobile payments in emerging markets

Philippine Long Distance Telephone Company is purchasing a 10% stake in Rocket, a German e-commerce investment firm. The deal will combine the Philippines telecom operator’s mobile expertise with Rocket's global e-commerce and web services footprint.

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Berlin-based e-commerce incubator Rocket Internet has received funds from a Philippine telecom operator to develop mobile payment systems in emerging markets. Philippine Long Distance Telephone Company is investing 333 million euros (US $445 million) for a 10% stake in Rocket. The deal will combine the Philippine telcom operator’s expertise in mobile payments and resources with Rocket's global e-commerce and web services footprint.

The two companies say they will develop mobile and online payment technologies and services in emerging markets. They plan to combine PLDT’s  mobile payments and remittance platforms with Rocket's global technology platform, to provide products and services for the unbanked, un-carded and unconnected population in less-developed markets.

“The partnership will allow us to leverage our combined strengths in developing online and mobile payment solutions in emerging markets,” says Napoleon Nazareno, president and CEO of Philippine Long Distance Telephone Company. “Rocket has developed a unique platform for establishing new Internet companies and a proven track record in successfully rolling out these businesses in fast growing markets.”

Rocket has invested aggressively in e-retailers in areas where e-commerce is growing at a fast clip. For instance, Rocket Internet last year raised $500 million to support startups in Africa, Latin America and Russia. Its e-retail investments include Mexico-based online retailer Linio, No. 78 in the 2014 Latin America 500 Brazil-based Dafiti, No. 19, and Westwing Home & Living, which sells in 12 countries including in Brazil.  It’s also invested in online retailers Zalora and Lazada in Southeast Asia.

Rocket Internet launched in 2007. Its portfolio companies employ more than 20,000 employees in 100 countries, and they have aggregated revenue in excess of 700 million euros ($934.45 million) in 2013. In addition to e-retailers and e-marketplaces, Rocket is also focused on financial technology and payments, a market it says has numerous and significant growth opportunities.

Philippine Long Distance Telephone Company’s subsidiary, Smart Communications Inc., provides mobile banking and mobile wallet services, particularly in regions where many consumers do not have bank accounts or payment cards. Its services include online money transfers, payments, disbursement, banking and security.

Smart's mobile money system handled 3.4 billion euros (US $4.54 billion) worth of transactions in 2013. Its mobile money subsidiary is now working with Citibank and Visa to develop new financial services. Smart’s mobile money services have also been used by United Nations and Philippine government agencies for cash distribution in areas affected by recent natural disasters.

Many consumers in emerging markets do not own credit cards. For example, according to the World Bank, just over one-quarter of Mexicans over the age of 15 have a bank account.  In 2011, the World Bank estimated the credit card penetration rate for Argentina among those ages 15 or older at 22% and put that figure at 13% for Mexico.

Rocket will issue new shares as part of the investment. A Philippine Long Distance Telephone Company executive will hold one spot on Rocket's nine-person supervisory board. Other investors in Rocket include Investment AB Kinnevik, Access Industries and Global Founders.

“Rocket and PLDT share a vision for the growth opportunity of Internet and mobile business models in emerging markets, as smartphone penetration increases exponentially,” says Oliver Samwer, founder and CEO of Rocket Internet. “Strategic partnerships are a core part of Rocket's strategy to rapidly roll out new Internet-based business models across diverse geographies. Financial technology is a key focus sector for Rocket and this partnership will allow us to build on PLDT’s innovations in mobile money and micro-payments and accelerate the delivery of those solutions around the world.”

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