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Market regulator has approved JV between Tencent and China Unicom. Photo: Reuters

Beijing approves public-private JV between Tencent and China Unicom covering content delivery networks

  • The JV between the investment arms of China Unicom and China’s biggest private tech company was one of 15 investment deals to receive approval
  • The unit will focus on content delivery networks and technologies such as edge computing

Chinese social media giant Tencent Holdings has received Beijing’s approval to set up a joint venture with a major China state-owned telecoms operator in a private-public sector deal.

The JV between the investment arms of China Unicom and China’s biggest private tech company was one of 15 investment deals to receive “unconditional approval” from the State Administration for Market Regulation (SAMR), the country’s antitrust watchdog, according to a notice published on the agency’s website dated last Thursday.

The unit will focus on content delivery networks and technologies such as edge computing, according to an overview of the deal given by SAMR in September, which aim to store huge volumes of data and process it faster – typically seen as an extension of cloud computing.

The joint venture is “based on the strategic needs of the company’s comprehensive advancement into the digital economy”, China Unicom said in statements filed to the Shanghai and Hong Kong Stock Exchanges late on Wednesday. In the long run, the venture will amplify the advantages of both companies and boost the content delivery network and edge computing industries, it added.

Tencent did not immediately respond to a request for comment.

Tencent sits on a vast treasure trove of personal data, thanks to its ubiquitous WeChat super app that gathers information from 1.2 billion users. The Shenzhen-based firm also operates one of the biggest cloud services in China.

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Tencent’s data – as well as its social media and online communication tools – is increasingly viewed as key infrastructure with implications for national security. Tencent made technological adjustments to its WeChat app last year to separate data gathered by its domestic app, Weixin, from the overseas version of WeChat.

News of the deal’s approval comes after Tencent last month denied speculation that China Mobile, another Chinese state telecoms operator, was taking a stake in the company. Meanwhile, Tencent’s biggest shareholder, Prosus NV, denied a media report that it was selling its stake in Tencent to a consortium led by state-backed Citic Group, a state-owned financial conglomerate.

Shares in China Unicom surged nearly 10 per cent to 3.75 yuan (0.52 cents) during Wednesday trading in Shanghai, while Tencent’s Hong Kong-listed shares rose 1.4 per cent to HK$230.6 before trading was suspended due to a No. 8 typhoon signal in the city.

Tencent, which was created by Chinese tech entrepreneur Pony Ma Huateng in 1998, was once seen as the first Asian company likely to hit a market cap of US$1 trillion although this never happened, and its shares have now lost over two thirds of their value since a peak two years ago. Tencent is the largest publisher of video games in the world by revenue.

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Tencent has been divesting earlier investments in other Chinese internet firms after Beijing declared that an “irrational expansion of capital” in the country must be curbed. China’s antitrust authority has fined Tencent retrospectively for many of its previous merger and acquisition deals.

Regulatory scrutiny of Tencent and other Big Tech firms has eased this year, with China’s leadership vowing to support the digital economy. During a Politburo meeting chaired by President Xi Jinping in July, China’s top leaders said they would give the “green light” to a number of pending tech investment deals, sending a policy signal that Beijing is ready to encourage certain financing pacts involving tech giants.

The deal is not the first collaboration between China Unicom and Tencent. In China Unicom’s ownership shake-up plan of 2017, the second-largest telecoms operator in China sold a 35.2 per cent stake for about 78 billion yuan (US$11.7 billion) to a consortium of private-sector investors led by Tencent, Alibaba Group Holding and Baidu. Alibaba is the parent company of the South China Morning Post.