About this Blog

The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Thursday, March 28, 2013

China's 3 Telecoms vs. Tencents, part 1. Is Tencents in trouble?

In the past two years, two significant developments occurred in China's internet industry. One is Weibo by Sina and another is WeChat by Tencents.

Both introduced incredible functions and are revolutional to both the online and mobile internet. This article is about Tencent's WeChat.

WeChat is the closest thing to Facebook in China. It is probably the only thing developed by China that is unique (Sohu's Sogou Pinyin Input system is another, but that is in a different league).

It is getting even hotter than Weibo. But Tencent's WeChat might just hit the nerve of entrenched government state own companies.

WeChat started in online internet. Since China's online industry is largely private, competitors can only defeat WeChat by providing better products. None is successful so far. But as WeChat starts to branch out to the mobile world, it gets right up to the state monopolies and their government friends.

The three Chinese mobile state own companies are China Mobile, China Telecom and China Unicom. When WeChat starts to expand to the mobile internet, it starts to gobble up products (Wireless Value Added Products) sold by the three state own companies. The three telecom companies are not happy. But they are not good at developing new products. However, they are good at conducting monopolistic practices.

There are a lot of rumors recently that talked about how the three companies are going to attack Tencent's WeChat. Some article below:

I don't have time to go through all the rumors (which I think are trial ballons floated by the 3 telecom companies). But one most hideous approach is to force Tencent's to pay the three telecom.

Imaging two companies competing. Company A built a superior product. Company B is not capable. But Company B has "connections". So Company B force Company A to pay Company B some money any time a user uses Company A's product.

I though even in China, this is too much. But I guess not. Today, an official from NDRC said, in an official news article, that WeChat shall charge users money.

Now, this is significant. NDRC is National Development and Reform Commission and it fall directly under the State Council. State Council is the administrative organ in charge of all internal affair in China. It is headed by Premier (China's number 2 guy).

The article where the NDRC official said that WeChat shall not be free:

At this point, Tencent's Wechat is in a very dangerous place.

This might also affect Sina's Weibo. But for Weibo, it could go either ways. If the Telecoms leaves Weibo alone, it might just give Weibo a chance to expand into WeChat's space. Then Weibo would truly be a super product (it is already a super product). But if Telecoms wants to target Weibo, it could also spell trouble for Sina. But overall, I think the chance of Telecoms attacking Weibo is very low because the nature of Weibo itself (it is hard to write Weibo messages from mobile phone).

Tencent has powerful friends itself. So this is not the end of it. I will follow this since this could complete change the landscape of China's internet industry.


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