Talks between Tencent, China's leading instant messaging operator, and China Mobile, the country's biggest mobile phone operator, are reaching the crucial stages as the December 31 expiry of their mobile chat contract draws near.
Tencent president Martin Lau Chi-ping said his company could lose up to 10 per cent of its revenue if the contract is not renewed.
The deadline seems less pressing for the phone company. Mobile chat, which allows users to send or receive instant messages over the phone, accounts for less than 0.1 per cent of China Mobile's revenue, Morgan Stanley analyst Richard Ji Weidong said.
Tencent, the country's largest internet company by market capitalisation, more than doubled revenue in the third quarter as subscribers to its free QQ service, the Chinese equivalent to Microsoft's MSN, bought more virtual pets and icons representing users' identities to display with their messages.
Between 60 and 70 per cent of China's internet population uses the instant messaging service, according to Mr Ji. That base helps draw users to Tencent's other online businesses which include a portal, games, auctions and a search engine.
Its online portal, QQ.com, is the mainland's most visited website, according to Alexa.com.