RUMOR: China Mobile CEO visits Tencent; Talk of Acquisition Spreads

The following is my latest post on Digital East Asia.

Warning – this one is straight from the rumor mills, but has been reposted on more than 3 dozen Chinese news sites according to Baidu News Search. The original source is Chinese IT news portal DoNews (in Chinese).

China Mobile Ltd.’s ((ADR) NYSE: CHL) CEO Wang Jianzhou and a team of senior executives visited Tencent Holdings Ltd. (HKG: 0700) headquarters on Dec 31st, 2009, and were received by Tencent President Martin Lau Chi Ping.  According to QQ.com (owned by Tencent), the Tencent management team showcased their R&D and applications in wireless Internet; whereas DoNews speculates that such a visit cannot just be for some demos, but is in fact to re-initiate discussions of China Mobile acquiring Tencent. According to an “industry insider” (DoNews’ anonymous source), China Mobile has been interested in buying Tencent ever since the era of its previous CEO Wang Xiaochu (who stepped down in late 2004).

It’s true that China Mobile has always seemed very serious about getting into the content side of the business, and is determined to be not just the “dumb pipe”. It developed in-house Fetion, which is an also-ran in the instant messaging market whose main value proposition is free text messaging to mobile phones. That feature helped the service gain a decent number of users, bust I guess most users are like me – I only log on when I need to send some text messages to my friends and I log off immediately afterwards (you get SMS notification if others reply). Buying Tencent would obviously give China Mobile a range of extremely profitable Internet properties and help it achieve its ambition in content; the doubt would be whether there could be any synergies actually realized – the AOL-Time Warner deal immediately jumps to mind.

Taking a step back, the high profile visit at least signals that some form of discussions is ongoing, and there will probably be at least some partnership deals coming soon. It will be interesting to see what comes out of this in the near future.

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