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Note 27 - Investments in Associates and Joint Ventures
 12 Months Ended
Dec. 31, 2019
Statement Line Items [Line Items]  
Disclosure of interests in other entities [text block]
NOTE
27.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
 
The Group has investments in associates and joint ventures, which are accounted for in accordance with the equity method, except for the preferred shares in OPay and Starmaker, as outlined below.
 
OPay Limited
 
OPay is an associate in which the Group had a
13.10%
ownership interest, of which
10.24%
is held in preferred shares and
2.86%
in ordinary shares as of
December 31, 2019.
The investment in ordinary shares is accounted for in accordance with the equity method, while the preferred shares are accounted for as long-term interests in the associate and measured at fair value through profit or loss. For information about the measurement of the preferred shares, see Note
16.
 
In
2018,
OPay launched a mobile wallet to customers in Nigeria, a market characterized by a large un-banked population with low mobile money penetration. In
2019,
OPay launched multiple new initiatives in Nigeria, most notably the ridesharing service ORide and the food-delivery service OFood. ORide achieved in excess of
150,000
daily orders already from its
first
three
months of operations, and more than
27,000
riders contributed to the platform model. Other new initiatives launched in
2019
include lending through OCredit and point of sale solutions for merchants through OPos. OPay’s goal is to become a
one
-stop mobile-based platform for financial and social inclusion.
 
In
2018,
OPay also launched a microlending business in Kenya with Opera as its partner, branded OKash. On
December 19, 2018,
the Group paid
US$9.5
million to OPay to acquire
100%
of the shares in TenSpot Pesa Limited (“TenSpot”), the then owner of the OKash business. TenSpot had previously been established as an entity held directly by Mr. Yahui Zhou with the sole purpose of obtaining microlending licenses in select markets for OPay, while OPay had the option to acquire all the shares in TenSpot for
US$1
(
one
dollar). By
December 2018,
TenSpot had subsidiaries, or had entered into agreements to acquire subsidiaries, with either licenses or pending license applications in several countries including India and Nigeria. Prior to OPay’s sale of the microlending business to Opera, OPay exercised its option to acquire TenSpot for
$1,
and assigned all intellectual property rights in OKash to TenSpot.
 
OPay recognized revenue of
US$16.7
million in
2019,
versus
US$0.8
million in
2018.
Establishing OPay as the leading provider of both mobile wallet and other services in Nigeria was given priority over near-term conversion of transaction value to revenue. Net loss for OPay during
2019
was
US$71.5
million. Cost of revenue was
US$41.1
million, of which
US$36.0
million related to the launch and scaling of ORide to become the dominant ride-hailing service in Lagos, including incentives to attract drivers in this initial period of operations. Operating expenses were 
US$47.6
million, driven by, and supporting, the substantial growth that OPay saw across its business lines. These
2019
operating expenses included expenses incurred to expand the user base and business operations of OPay, such as marketing expenses of
US$6.6
million, compensation to personnel of
US$15.5
million and depreciation and amortization of
US$5.9
million.
 
To fund its growth, OPay raised a total of
US$170
million in new capital from investors in
2019
by issuing both ordinary and preferred shares. On
June 14, 2019,
the Group acquired
3,210,617
Series Seed+ preferred shares in OPay for
US$7.5
million by converting loans to equity. On the same date, the Group also acquired
1,230,736
Series A preferred shares in OPay for
US$4.6
million by converting
US$2.67
million of debt to equity and by transferring
US$1.93
million in cash. By the end of
2019,
the accumulated investment made in OPay was
US$12.1
million. Of the loans converted to equity in
2019,
US$5.0
million was classified as part of the net investment in prior periods. In
2019,
the Group recognized an unrealized gain on the preferred shares of
US$33.9
million. See Note
16
for more details.
 
Summary information regarding OPay:
  
 
 
 
  
 
 
 
  
 
 
 
   
Year ended December 31,
 
[US$ thousands]
  
 
2017
(1)
  
 
2018
    
 
2019
  
The Group’s interest
  
 
19.9
%
  
 
19.9
%
  
 
13.1%
(2)
Revenue
    
-
      
848
      
16,687
 
Other income
    
-
      
9,500
      
339
 
                         
Cost of revenue
    
-
      
(255
 )    
(41,117
)
Personnel expenses including share-based remuneration
    
(2,331
 )    
(5,738
 )    
(15,490
)
Marketing and distribution expenses
    
-
      
(162
 )    
(6,623
)
Depreciation and amortization
    
-
      
(260
 )    
(5,858
)
Other expenses
    
(500
 )    
(4,293
 )    
(19,616
)
Operating profit (loss)
  
 
(2,831
)
  
 
(359
)
  
 
(71,678
)
Finance income
    
-
      
1
      
736
 
Finance expense
    
-
      
(25
 )    
(417
)
Income tax (expense) benefit
    
-
      
-
      
(114
)
Net income (loss)
  
 
(2,831
)
  
 
(384
)
  
 
(71,474
)
Other comprehensive income that may be reclassified to net income
  
 
-
    
 
-
      
-
 
Total comprehensive income
  
 
(2,831
)
  
 
(384
)
  
 
(71,474
)
Group's share of net income (loss)
  
 
(563
)
  
 
(76
)
  
 
(2,938
)
Gain on partial disposal
(3)
    
-
      
-
      
1,174
 
Total share of net income (loss)
  
 
(563
)
  
 
(76
)
  
 
(1,764
)
                         
Current assets
    
5,600
      
4,302
      
99,238
 
Non-current assets
    
55
      
4,918
      
24,656
 
Current liabilities
    
8,431
      
12,043
      
28,870
 
Non-current liabilities
(4)
    
-
      
453
      
170,015
 
Equity
    
(2,776
 )    
(3,276
 )    
(74,992
)
 
(
1
)
Period from
November 1
to
December 31, 2017.
 
(
2
)
Reflects the total ownership interest in OPay as of
December 31, 2019,
10.24%
of which is held in preferred shares and
2.86%
in ordinary shares. The ownership interest reduced during
2019.
The share of net income (loss) recognized under the equity method was calculated based on the investment in ordinary shares, relative to the total number of shares outstanding. The Group owns
8.85%
of the total number of ordinary shares issued by OPay. 
 
(
3
)
 In
2019,
the Group sold some of its ordinary shares in OPay for the purpose of an employee equity program in the company. The gain on partial disposal is included in Share of net income (loss) of associates and joint ventures in the Statement of Operations. See Note
28
for more information. 
 
(
4
)
Preferred shares issued by OPay are classified as financial liabilities in the financial statements of the company. 
 
StarMaker Inc.
 
StarMaker is an associate in which the Group had preferred shares representing a
19.35%
ownership interest as of
December 31, 2019.
The preferred shares, accounted for as long-term interests and measured at fair value through profit or loss, have dividend and liquidation preference. In
2019,
the Group recognized an unrealized gain on the preferred shares of
US$4.0
million. The Group has an option to increase its ownership to
51%
in the
second
half of the year
2020.
The option, if exercised, will entail the Group acquiring the shares at either fair value, or at a proxy of fair value. Accordingly, the fair value of the option is immaterial as at
December 31, 2019.
For information about the measurement of the preferred shares, see Note
16.
 
StarMaker is a technology-driven social media company focused on music and entertainment. StarMaker enables users to record and share their own music videos, collaborate with other musicians, connect with other users and follow their idols on the social platform.
 
nHorizon
 
nHorizon is a joint venture in which the Group has a
29.09%
ownership interest. nHorizon operates an Opera browser in China with monetization partners, including Baidu, Sogou and others. nHorizon consists of nHorizon Innovation (Beijing) Software Limited and nHorizon Infinite (Beijing) Software Limited (collectively, “nHorizon”). The joint venture was co-founded by Otello Corporation ASA and Telling Telecom in
August 2011.
The Group acquired the investment in nHorizon as a result of the acquisition of Opera Norway AS in
2016.
 
Powerbets Holdings Limited
 
Powerbets is a joint venture in which the Group has a
50.1%
ownership interest. It is a joint venture with a group related to Supabets HL Limited. The joint venture was established on
August 1, 2017.
It provides a platform for sports betting, virtual sports betting, and gaming services throughout Africa. Having
one
of the largest gaming footprints in Africa, Powerbets is licensed in
nine
African markets and operational in eight.
 
2017
summary information regarding nHorizon and Powerbets:
   
Year ended
December 31, 2017
   
Period from
August 1 to
December 31, 2017
 
[US$ thousands]
  
nHorizon
   
Powerbets
 
The Group’s interest
  
 
29.09
%
  
 
50.10
%
Revenue
    
42,298
      
7,562
  
Operating profit (loss)
    
(2,219
 )    
(505
 )
Net income (loss)
    
(2,710
 )    
(529
 )
Group’s share of net income (loss), before adjustment
  
 
(788
)
  
 
(265
)
Adjustments related to amortization of intangible assets
    
-
      
(54
 )
Group's share of net income (loss)
  
 
(788
)
  
 
(318
)
                 
Assets
    
19,302
      
2,672
  
Short-term liabilities
    
15,720
      
5,649
  
Equity
    
3,583
      
(2,977
 )
 
2018
summary information regarding nHorizon, Powerbets and StarMaker:
   
Year ended December 31, 2018
 
[US$ thousands]
  
nHorizon
   
Powerbets
   
StarMaker
 
The Group’s interest
  
 
29.09
%
  
 
50.10
%
  
 
19.35%
(1)
Revenue
    
48,992
      
4,498
      
12,332
 
Operating profit (loss)
    
(1,568
 )    
(4,528
 )    
(9,639
)
Net income (loss)
    
(2,056
 )    
(4,735
 )    
(8,602
)
Other comprehensive income that may be reclassified to net income
    
-
      
188
      
-
 
Total comprehensive income
    
(2,056
 )    
(4,547
 )    
(8,602
)
Group's share of net income (loss)
  
 
(598
)
  
 
(2,372
)
  
 
N/A
 
                         
Current assets
    
9,761
      
2,751
      
21,366
 
Non-current assets
    
1,065
      
2,851
      
11,245
 
Current liabilities
    
3,818
      
7,818
      
30,163
 
Non-current liabilities
    
5,469
      
5,114
      
-
 
Equity
    
1,539
      
(7,331
 )    
2,448
 
 
2019
summary information regarding nHorizon, Powerbets and StarMaker:
   
Year ended December 31, 2019
 
[US$ thousands]
  
nHorizon
   
Powerbets
   
StarMaker
 
The Group’s interest
  
 
29.09
%
  
 
50.10
%
  
 
19.35%
(1)
Revenue
    
43,335
      
4,990
      
29,035
 
Operating profit (loss)
    
1,821
      
(3,016
 )    
(8,485
)
Net income (loss)
    
1,780
      
(5,134
 )    
(8,485
)
Other comprehensive income that may be reclassified to net income
    
-
      
-
      
-
 
Total comprehensive income
    
1,780
      
(5,134
 )    
(8,485
)
Group's share of net income (loss)
  
 
518
    
 
(2,572
)
  
 
N/A
 
                         
Current assets
    
8,225
      
4,447
      
13,869
 
Non-current assets
    
695
      
1,560
      
11,377
 
Current liabilities
    
5,875
      
13,074
      
29,870
 
Non-current liabilities
    
-
      
5,754
      
-
 
Equity
    
3,045
      
(12,822
 )    
(4,624
)
 
(
1
)
 The Group ownership interest in StarMaker is held through preferred shares, which are measured at fair value through profit or loss.
 
The following tables specify the carrying amounts for investments in associates and joint ventures.
 
   
Year ended December 31, 2018
 
[US$ thousands]
  
nHorizon
   
Powerbets
   
OPay
   
StarMaker
 
Carrying amount as of January 1, 2018
    
1,110
      
-
      
4,406
      
-
  
Investment during the year
    
-
      
2,567
      
-
      
30,000
  
FX adjustment
    
(69
 )    
-
      
-
      
-
  
Share of net income (loss)
    
(598
 )    
(2,372
 )    
(76
 )    
-
  
Share of other comprehensive income
    
-
      
94
      
-
      
-
  
Carrying amount as of December 31, 2018
  
 
443
    
 
289
    
 
4,330
    
 
30,000
  
                                 
Groups share in %
    
29.09
 %    
50.10
 %    
19.90
 %    
19.35
 %
Groups share in equity
    
448
      
(3,673
 )    
(652
 )    
N/A
  
Unrecognized intangible assets
    
-
      
1,492
      
-
      
N/A
  
Equity method adjustments
    
(5
 )    
2,469
      
4,982
      
N/A
  
Carrying amount as of December 31, 2018
  
 
443
    
 
289
    
 
4,330
    
 
30,000
  
 
   
Year ended December 31, 2019
 
[US$ thousands]
  
nHorizon
   
Powerbets
   
OPay
   
StarMaker
 
Carrying amount as of January 1, 2019
    
443
      
289
      
4,330
      
30,000
  
Investment during the year
    
-
      
366
      
7,131
      
-
  
Change in fair value of preferred shares
(1)
    
-
      
-
      
33,900
      
4,000
  
FX adjustment
    
3
      
-
      
 
      
-
  
Other adjustments
    
-
      
157
      
673
      
-
  
Share of net income (loss)
    
518
      
(2,572
 )    
(2,938
 )    
N/A
  
Share of other comprehensive income
    
-
      
-
      
-
      
N/A
  
Carrying amount as of December 31, 2019
  
 
963
    
 
(1,760
)
  
 
43,096
    
 
34,000
  
                                 
Groups share in %
    
29.09
 %    
50.10
 %    
13.1
 %    
19.35
 %
Groups share in equity
    
886
      
(6,424
 )    
(2,145
 )    
N/A
  
Unrecognized intangible assets
    
-
      
566
      
-
      
N/A
  
Equity method adjustments
    
77
      
4,097
      
(759
 )    
N/A
  
Fair value of preferred shares
(1)
    
-
      
-
      
46,000
      
34,000
  
Carrying amount as of December 31, 2019
  
 
963
    
 
(1,760
)
  
 
43,096
    
 
34,000
  
 
(
1
)
 The carrying amount of the preferred shares form part of the net investment in the associates.
 
In the Statement of Financial Position, the amount of Investments in associates and joint ventures includes both the carrying amount determined using the equity method and the fair value of the preferred shares.