China Unicom

Unicom, Alibaba to expand collaboration in cloud computing services in China

The plan marks the first cooperative venture with a strategic investor after the partial privatisation of Unicom’s Shanghai-listed parent

PUBLISHED : Monday, 23 October, 2017, 10:26pm
UPDATED : Monday, 23 October, 2017, 10:49pm

China Unicom, the world’s sixth-largest mobile network operator by number of subscribers, and e-commerce powerhouse Alibaba Group Holding plan to ramp up their collaboration in cloud computing services.

The partial privatisation of Unicom’s parent, Shanghai-listed China United Network Communications, saw Alibaba and rival internet giants Baidu, Tencent Holdings and take a combined 12.88 per cent shareholding in Unicom’s Shanghai-listed controlling shareholder.

“This represents the first major business cooperation with a strategic investor after China Unicom’s mixed-ownership reform plan was approved,” said the telecommunications operator in a statement on Monday.

Unicom, which had 276.9 million mobile subscribers as of the end of September, said “building a power alliance with Alibaba” would help both companies expand their cloud services across different industries in China.

Cloud services enable companies to buy, lease or sell software and other online digital resources on demand, just like electricity from a power grid.

These operations are hosted in data centres, which are secure, temperature-controlled facilities that house large-capacity servers and data storage systems, and are equipped with multiple power sources and high-bandwidth internet connections.

Alibaba says it is on track to overtake Amazon as world’s top cloud computing services firm

Unicom said increased cooperation with Alibaba Cloud, the cloud computing arm of New York-listed Alibaba, will focus on so-called public cloud, dedicated cloud and hybrid cloud services.

Their ties in the public cloud market segment, for example, will see Alibaba Cloud open up its resources in storage, security, artificial intelligence and big data to Unicom.

Combined with Unicom’s expertise in network operation and customer services, their alliance would provide enterprise customers with more comprehensive public cloud services, the Unicom statement said.

Alibaba Cloud reached a milestone at the end of June this year, exceeding one million paying customers and recording a 96 per cent year-on-year increase in revenue to 2.4 billion yuan (US$362 million).

Unicom said its alliance with Alibaba, which owns the South China Morning Post, will include jointly building a robust network security platform to support internet users across the country.

Nomura analyst Joel Ying said in a recent report that the mixed ownership scheme should help China Unicom achieve a recovery in business and financials.

The company received a huge windfall of HK$88 billion (US$11.28 billion), following the completion of the ownership transactions.

The company said in August that parent China United Network agreed to buy about 6.6 billion new Unicom shares at HK$13.24 each through its subsidiary Unicom BVI. That amount represents about 100 per cent of the total funding raised by China United Network from the sale of the 35.2 per cent stake to the group of private investors.

China Life Insurance, the country’s largest life insurer, is China United Network’s biggest individual investor, with a 10.22 per cent stake.