• Sun
  • Dec 21, 2014
  • Updated: 9:40pm
Corporate China
PUBLISHED : Tuesday, 08 April, 2014, 10:48am
UPDATED : Tuesday, 08 April, 2014, 10:49am

Weibo: JD shuffles staff, prepares VNO launch

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Rising e-commerce giant JD.com has been all over the blogosphere this past week, trumpeting some major adjustments in its core e-commerce unit as it also prepares to become one of the first companies to challenge China's three major telcos under a new plan to open up that sector. Of course all of this comes against the backdrop of JD.com's own upcoming New York IPO, which could raise up to $1.5 billion (HK$11.6 billion).

If I was being cynical, I might say that much of this buzz is aimed at keeping JD in the headlines as it prepares to list, especially since last week saw early signs that the red-hot New York market for Chinese IPOs may be starting to cool. But in this case, I do think that much of the buzz coming from JD seems genuine and isn't just hype, as the company tries to position itself to pose a major challenge to e-commerce leader Alibaba.

JD was in the headlines last month when it formed a major equity alliance with leading Internet company Tencent (0700.HK), which saw the pair combine their e-commerce businesses to create a major new player with about a quarter of the market. The biggest casualty of that tie-up has been employees of Tencent's e-commerce site Yixun, which has seen an exodus of employees as the unit prepares to get absorbed by JD.

Yixun executive Lin Wenqin was getting nostalgic about the recent wave of employees leaving his unit, noting that he had officially accepted the resignation of several groups of workers in the last week alone. He also reflected on how quickly things are changing in China's e-commerce space, making a revealing Cold War metaphor to note how yesterday's enemies can become today's allies.  

While many at Yixun were leaving, one new arrival to JD who was tweeting nonstop on his microblog was Xu Xinquan, who confirmed he has just taken a top spot in JD's international division. Most of Xu's tweets were pointless drivel, including self-serving comments that China would inevitably produce a global e-commerce leader to challenge the likes of Amazon (Nasdaq: AMZN).  

Xu's appointment and comments hint that JD could soon reveal details of a major global expansion, as part of a campaign to generate buzz before its IPO. One of the biggest surprises for me in the news of Xu's appointment was the fact that he came to JD from the e-commerce division of networking equipment giant Huawei. Frankly speaking, I was completely unaware that Huawei had an e-commerce division, and certainly can't imagine that anyone from that unit would be a serious sector player.

All that chatter from JD's e-commerce division somewhat overshadowed an equally interesting series of tweets from Xie Yongzhi, a top executive at JD's recently established telecoms division. Both JD and Alibaba were among 11 recipients of virtual network operator (VNO) licenses last year, which will allow them to offer telecoms services to compete with China Mobile (0941.HK; NYSE: CHL), China Unicom (0762.HK; NYSE: CHU) and China Telecom (0728.HK; NYSE: CHA).

I've previously predicted the new VNO services could face some stiff headwinds, since the operators can't build their own networks and instead must lease network capacity from the big 3 telcos that are also their main rivals. The telecoms regulator is also placing a number of restrictions on how and where the VNOs can offer service, which will put them at a further disadvantage.

Despite those handicaps, JD is moving quickly ahead with its VNO plan, and Xie Yongzhi said that service will formally launch in the middle of next month. He didn't give many details about the service, though he did say pricing was still under discussion and the product would be competitive. The most interesting detail saw him disclose that the new product would have "special JD qualities" and offer more than just telecoms service.

It would be quite logical to expect this new product could offer phone service for very cheap or even for free to frequent JD shoppers. Such a product would also make smartphone shopping on JD's site quite easy, which could give the service a unique advantage over more generic service now in the market from the big 3 telcos. Look for more similar hype in the run-up to the launch of this product, which could have potential to find a big audience among China's growing legions of e-commerce fans.

To read more commentaries from Doug Young, visit youngchinabiz.com

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