Alibaba Group (BABA) and Tencent Holdings are reportedly gearing up to join in an investment in China Unicom, the state-owned mobile carrier.
Two people with direct knowledge of the matter told Reuters the investment totals around $12 billion and is part of the government’s push to inject private capital into state-owned businesses. Reuters noted that last year Beijing added the wireless carrier to the list of government-backed entities that can get investments from private firms. Alibaba and Tencent, both of which are aiming to diversify beyond their core markets and are rivals in the world of ecommerce, are reportedly investing $10 billion in China United Network Communications, which is the Shanghai-listed unit of Unicom. Baidu is reportedly investing $1.48 billion while JD.com’s investment is pegged at $740 million, the sources told Reuters.
Room for Two More?
While the Reuters report names four potential investors for the Chinese mobile company Jefferies analyst Edison Lee doesn’t think there will be more than two backers. In a report in Barron’s, the analyst pointed out that Unicom has long stressed it wants investors that can realize synergies with it and help with operations. That is more important to the company than raising money, which is why Lee doesn’t think it will take on more than two investors. With multiple investors, argued the analyst, it could result in a loss of focus. The analyst also contended that some of the would-be investors could be investing in the mobile carrier in an effort to curry favor with the government. What’s more, a joint investment by Alibaba and Tencent—the two he said have the most ability to complete a transaction—may not be feasible because they are rivals. The analyst said a better investment pair would be JD.com and Tencent. (See also: Alibaba Continues Investment Spree With $1.25 Billion Investment in Food Delivery Platform Ele.me.)
The push to invest in a mobile carrier in China comes at a time when all of the major tech players in the country are looking to diversify. Alibaba has been branching out into different areas via big investments in all sorts of companies and regions. Just last week, the Economic Times reported Alibaba is eyeing the online grocery market in India, which is set to explode, reportedly holding talks to acquire a large minority stake in BigBasket, the largest online grocer in the country. Citing a person familiar with the developments, The ET reported China’s leading ecommerce player is joining Paytm Mall, the Indian shopping app, to make a $200 million investment in the food-focused etailer, giving it a valuation of close to $900 million. BigBasket operates in roughly 25 cities in India and was the subject of a Bloomberg report last month that Amazon.com Inc. (AMZN
) was in talks to acquire the company. The valuation after the $200 million investment would be in line with what the company was looking for and is double its value when it raised funding in March 2016, noted the ET. The two companies have already started due diligence on BigBasket, reported ET. It has also set its sights in Southeast Asia and recently launched an initiative to help U.S. small business owners sell their products in China.