China Unicom, Baidu Form Alliance Amid SOE Ownership Reform

  • Companies to cooperate in areas like mobile internet
  • Pact comes as mobile carrier picked to study ownership reform

China Unicom and Baidu Form Alliance: The Pros and Cons

China United Network Communications, the government-owned parent of the country’s second-largest wireless carrier, and Baidu Inc. agreed to partner on mobile Internet, artificial intelligence and other areas amid plans for ownership reform of state-owned enterprises.

The companies will also cooperate on big data and basic telecommunication services, the parent of China Unicom Hong Kong Ltd. said Wednesday in a statement. Baidu will help add digital advertising and tools like facial recognition at the mobile carrier’s more than 300,000 stores, the search engine giant said in a separate statement.

The announcement comes about a month after the National Development and Reform Commission selected China United Network, along with other five state-owned enterprises, for a pilot program in mixed-ownership reform with the aim of revitalizing them. The collaboration raises the prospect of China United Network further engaging with Baidu on reform, though any move will need government approval, said Steven Liu, an analyst at China Securities International.

“The companies may be taking initiative to explore ideas around mixed-ownership reform, as the government has provided no detailed guidance on how it should progress,” said Liu. “In other words, China United Network is offering the government some inspiration on how the reform could take shape.”

The mixed-ownership reform aims to boost efficiency of state-owned enterprises and could take place in different ways including sale of a minority stake to a private company. Technology companies such as Baidu, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. could be “probable” choices as a strategic investor in China Unicom, Elaine Lai, an analyst at Jefferies Hong Kong Ltd., said last month.

Representatives at both China Unicom and Baidu declined to comment on whether Baidu will be a partner in mixed-ownership reform.

China Unicom shares rose 0.6 percent as of 9:39 a.m. in Hong Kong trading Thursday. Baidu’s American depositary receipts dropped 2.7 percent as of the close in New York Wednesday, compared with a 0.7 percent decline in the S&P 500 Index.

China United Network Chairman Wang Xiaochu and Baidu Chairman Robin Li both attended the signing ceremony in Beijing, the companies said in separate statements. China United Network’s unit China Unicom Hong Kong has a market value of $27.6 billion.

— With assistance by Jeanne Yang

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