Tencent teams up with state-owned carrier China Unicom - PingWest

Tencent teams up with state-owned carrier China Unicom

Tencent teams up with state-owned carrier China Unicom

5 hours ago

China’s internet and social giant Tencent has set up a joint-venture with the state-owned carrier China Unicom, according to a document released by the State Administration of Market Regulation (SAMR).

Tencent will own 42% of the JV, while China Unicom will take 48%, as regulators disclosed in September. The remaining 10% will be reserved for the company's employees.

The news quickly caught people’s attention on social media, with some misinterpreting the move as the beginning of a greater involvement of state capital in the management of private companies.

The speculation is rooted in recent rumors, as the approval for the Tencent-Unicom JV comes after China Mobile was rumored to be taking a stake in Tencent on October 24, which was denied by Tencent.

In fact, the establishment of the new entity does not imply that Tencent will be controlled by state-owned enterprises, but paves the way for it to access a specific, government-led cloud computing market.

Since last August, mutiple provincial governments in China are building state-owned assets cloud platforms and have asked state-owned enterprises to move their cloud computing service businesses to these platforms. 

Industry analysts said the partnership will boost both sides' development in the government-led cloud computing and smart city sectors.

The new entity will focus on three areas - internet data centers, content delivery networks and edge computing, according to a Reuters report.

In addition, China Unicom already have a long history of cooperation with Tencent and other tech companies in China. In August 2017, China Unicom disclosed a “mixed-reform” program, proposing to increase 9.037 billion shares, with the participation of a number of Internet companies, including Tencent. 

Among the private strategic investors, Tencent topped the list with 11 billion yuan, accounting for 5.21% of the shares; followed by Baidu with 7 billion yuan, accounting for 3.31%; Alibaba with 4.33 billion yuan, accounting for 2.05%; JD.com with 5 billion yuan, accounting for 2.36%; and SuNing with 4 billion yuan, accounting for 1.88%.

The cooperation with China’s big techs is meant to vitalize state-owned companies such as China Unicom. Similarly, Huawei and China Telecom, another state-owned carrier, established BJIC — Business Joint Innovation Center in 2018.