The investment arms of state-owned telecom operator China Unicom and internet champion Tencent have received unconditional regulatory approval to set up a new joint venture (JV) that will spearhead telecom innovations in a state-private tie-up. The JV is to be formed between Unicom Innovation Venture Capital and Shenzhen Tencent Industry Venture Capital Co. In a filing with the Shanghai Stock Exchange, China Unicom said that the new JV will focus mainly on its content delivery network (CDN) and edge computing businesses, and it has set its sights on indigenous research and development. China Unicom said the new JV has no major impact on its current production and operations, while over the longer run it will strengthen its CDN and edge computing supply chains. Tencent has yet to publicly comment on the new JV. Upon the deal's completion, Unicom Innovation Venture Capital will hold a 48% stake in the JV, Shenzhen Tencent Industry Venture Capital will have a 42% stake, and employees will hold the remaining 10%.
Founded in Beijing in April 2014, Unicom Innovation Venture Capital, ultimately controlled by China Unicom, mainly engages in self-funded investment. The Tencent investment unit, for its part, was created in September 2019 in Guangdong province, principally committed to telecommunications and socializing, digital content and fintech. Lu Shan, Senior Executive Vice President at Tencent also serves as a Board Member at China Unicom.
The JV is likely to capitalize on the strengths of both sides to achieve more secure and self-controlled digital infrastructure, Wang Peng, Assistant Professor at the Gaoling School of Artificial Intelligence at the People's University of China, told the Global Times. As a major telecom operator, China Unicom has advantages in digitalized technological infrastructure, notably base stations and networks. The carrier has also been gaining a foothold in the application market, Wang said. In the case of Tencent, one of the country's top digital economy firms, its portfolio of content operations, websites, apps and user services, will certainly sharpen the new JV's competitiveness as a hybrid champion spanning new infrastructure, platforms and applications, according to analysts.
In another sign of such closer link-ups, Jingdong Digits Technology Holding Co, the fintech unit of Chinese retailer JD.com, signed a strategic cooperation agreement with the Shanghai subsidiary of China Mobile, the larger peer of China Unicom. Under the agreement, the two sides will jointly advance innovations in smart cities, digital government, data centers, cloud computing and big data, among other areas. Dutch internet conglomerate Prosus and its South African parent Naspers denied media reports that they are in talks to sell their large stakes in Tencent to a group of investors led by Chinese state-owned investment firm CITIC, the Global Times reports.
