Can China Unicom be reborn through its BATJ partnership?

Though China’s telecommunications sector remains under strict government control, the country’s No. 2 operator, China Unicom, has been stepping up efforts to move to a mixed ownership structure.

As part of the program, Unicom has forged an alliance with four internet giants, hoping to leverage the ties to establish a whole new business model, rather than remain content with just selling connectivity to users.

Last week, Unicom announced approvals for the appointment of new board directors, helping bring in top executives from Baidu, Alibaba, Tencent and JD.com, the so-called BATJ firms.

The expanded Unicom board now includes Lu Shan, a senior executive vice president of Tencent; Robin Li, the chairman and CEO of Baidu; Liao Jianwen, the chief strategy officer of JD.com; and Hu Xiaoming, a senior vice president of Alibaba.

Their appointment follows a move by Unicom to introduce Baidu, Alibaba, Tencent and JD.com as strategic shareholders as part of a mixed ownership reform.

Unicom has been under huge pressure from key competitors China Mobile and China Telecom, as the company failed to boost its market share in both the mobile and fixed-line segments.

China Mobile has been dominating the mobile market on the mainland for a long time. Meanwhile, latecomer China Telecom has been catching up with Unicom in terms of total mobile users.

In the fixed-line broadband business, Unicom is also challenged by China Mobile as the latter aggressively rolled out service on the back of China Teitong’s network.

From the consumer market perspective, Unicom is no doubt an underdog, and it is not easy for the firm to win back market share from rivals.

But now, the company hopes to improve the situation by taking advantage of its alliance with the four Chinese internet giants.

Leveraging on the strategic partnership with BATJ, Unicom is in a good position to implement service fee reform by waiving all the data usage fees on specific applications, and also move in line with the government’s policy of “reducing service fees whilst boosting the network speed”.

For example, Unicom can provide “data-free” service plan for services like Weixin, online games, online shopping, video streaming and other related services provided by BATJ. With launch of such new service plans, the telecoms firm should be able to attract a number of youngsters.

When more users opt for such plans, Unicom can work out a revenue sharing model with its partners to create “win-win” situation for both sides.

If such free data plans are successful, rivals like China Mobile and China Telecom would also follow afterwards, which should benefit all mobile users in the market.

As a smaller player in the market, Unicom needs to streamline its business operation and prepare for completely online operations, especially as the Chinese government could launch mobile number portability to all users in 2020.

When across-the-board portability is in place, it could provide a great opportunity for Unicom to win users from China Mobile, helped by service innovation and technology support.

Drawing on the experience of Alibaba and Tencent in e-commerce marketplace, Unicom should quickly develop its own pure-online sales platform before the number portability launch, enabling customers to register and select service plans and have the SIM cards delivered quickly anywhere.

Right now, mobile users in rural or inland cities in China don’t have a real choice in terms of service providers, due to the lack of retail outlets other than those of China Mobile. The people are forced to join China Mobile services.

In this situation, if Unicom launches an online platform with the help of BATJ, it can help transform the telecoms firm’s operation and facilitate service subscriptions over the Internet.

Apart from the consumer market, Unicom can also seize opportunities in the enterprise market, drawing on the expertise of the Internet firms in big data analytics and cloud computing services.

Unicom has already teamed up with Alibaba’s Aliyun service in China to provide public cloud service to enterprises in a bid to tap the opportunity arising from new government rules which required that public cloud services should be provided by state-owned firms.

Also, Unicom’s Wo Cloud service is using Alibaba’s cloud infrastructure, something that should help the operator to strengthen its service offering as a whole.

Unicom’s alliance with the BATJ firms may not translate into concrete financial gains for the telecoms operator in the short term, but it can surely pave way for a host of new possibilities in the long run, helping the firm accelerate its growth with an innovative business model.

– Contact us at [email protected]

RC

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Out of prison, does China’s former video-streaming king Wang Xin have a second act?

Wang Xin, one of the pioneers of China’s online video-streaming market, looks to be in search of a second act as he shared his views on artificial intelligence (AI), blockchain and other topics in technology following his release from prison on Wednesday.

The controversial Chinese internet entrepreneur was handed a three-and-a-half-year prison sentence and fined 1 million yuan (US$159 million) in 2016 by the Beijing Haidian District People’s Court, which found him guilty of “distributing obscene materials for personal gain” as his online business provided easy access to pornography and various pirated content.

Separate posts by family and friends on Sina Weibo suggested that a comeback could be in store for the 38-year-old Wang, who discussed his views on the latest trends in China’s red-hot technology market at a dinner after his release.

“I firmly believe that in the near future there will be another legendary story of master Wang,” said He Xiaopeng, the co-founder and chairman of electric car start-up Xiaopeng Motors, in a Sina Weibo post on Wednesday.

Behind the great firewall, China’s internet is thriving

He described Wang as being “in good health and synchronised mind like us” as the newly freed entrepreneur discussed various hi-tech developments, such as AI, video streaming and blockchain.

In addition, He posted group photos with Wang alongside David Li Xueling, the co-founder and chairman of video-based social network YY, and Michael Yao Jinbo, the chairman and chief executive of Chinese online classifieds platform operator 58.com.

He subsequently deleted that post and photos from his Sina Weibo account. Neither Wang nor YY’s Li could be reached for comment on Thursday. Xiaopeng’s He did not reply to an inquiry made via WeChat, while calls made to 58.com’s Yao were not answered.

While Wang’s business reputation will need rehabilitation after his conviction and stint in prison, he will find a market that is fostering the development of a growing number of technology start-ups.

China’s hi-tech boom has minted a new generation of billionaires who are involved in fields like online shopping, mobile gaming or AI rather than property development or traditional financial services.

Unicorn fever seizes China as start-ups and investors seek the next big thing

The government has also encouraged increased entrepreneurship to ensure enough jobs for the world’s most populous nation, while steering the economy away from the old, foreign investment-led manufacturing model to one that is grounded in innovative, internet-related technologies.

It is a trend that supports advanced automation through such hi-tech developments as the internet of things, big data analytics, cloud computing and AI.

China’s vast population of internet users have also helped to foster a unique environment where start-ups can enjoy huge success in an unusually short period of time, according to a joint study published in September last year by Boston Consulting Group, Baidu, Didi Chuxing and Alibaba Group Holding, owner of the South China Morning Post.

Wang, a graduate of the Nanjing University of Posts and Telecommunications, founded Shenzhen-based online video service Qvod Technology Co in 2007 after working at Shanda Interactive Entertainment.

Qvod gained notoriety for peer-to-peer video-streaming platform called Kuaibo, which allowed users to watch mostly pirated video and pornography, as well as a popular desktop video-editing software.

By 2011, Qvod had a reported 80 per cent share of the video-streaming market in China and about 500 million users.

In November 2013, a coalition of the country’s biggest online video providers – including Tencent Holdings, Youku Tudou and Sohu – sued Qvod for unauthorised video sharing.

Tencent Video, iQiyi in race to lead China’s online video market

When police started investigating Wang later that year for repeated violations of copyright law and for spreading pornography online, he fled overseas and was on the run for about 110 days.

He was apprehended by Interpol in August 2014 at an unspecified country and repatriated back to the mainland, according to a Xinhua report at that time.

After Wang was charged in 2015, the police reported that most of the videos found in Qvod’s servers were pornographic content.

Three other Qvod executives were each handed prison sentences of up to three years and three months, and fined 500,000 yuan each by the Beijing court in 2016. Qvod was fined 10 million yuan.

How ‘China’s Steve Jobs’ bit off more than he could chew and saw his tech empire collapse

A report by Global Times, a government-backed newspaper, said Wang showed remorse for his actions during the trial. It quoted him as saying that “faced with the choice between social responsibility and company interests, I chose the latter”.

Qvod’s official website remains live. A post dated January 2017 on its homepage said the company has not released any new video-streaming players.

In a post dated January 27 this year, the Sina Weibo account owned by Wang’s wife, who has more than 160,000 followers, thanked Wang’s supporters ahead of his release.

It received almost 2,400 comments, with the top-voted commenter stating his belief that Wang “will stage a comeback in business”. Wang’s wife did not respond to inquiries made via Weibo.

Additional reporting by Sarah Dai

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Will China Weaponize Social Media?

ATLANTA – Ever since the 2016 US presidential election, with its revelations about Russian meddling, European officials have been on the lookout for similar attacks. But Europeans aren’t the only ones paying attention. So, too, are China’s leaders, who are considering what they might learn from the Kremlin’s successes.

For Chinese President Xi Jinping, maintaining domestic stability is a top priority, a point underscored by China’s annual budget for internal security. At well over $100 billion, the official number is low. Like defense outlays, the real number is much higher, owing to hidden spending, including on research and development.

For example, China is exploring how artificial intelligence (AI) and big data can be used to monitor everything from social media to credit-card spending, and it plans to assign all citizens a social-reliability rating to weed out potential troublemakers. The regime’s Orwellian strategy is focused squarely on social media and controlling not just what is said, but also how information flows into and around the country.

Moreover, the authorities are bringing technology companies into line with tough new laws and cyber-security investigations. For Xi, the ease with which the Kremlin has manipulated Facebook and Twitter demonstrates the need for a tighter grip on China’s own social-media platforms. The Chinese government is now requesting seats on the boards of companies such as WeChat, Weibo, and Tencent, and demanding access to their users’ personal data.

Chinese cyber spies are also studying Russia’s success. To be sure, Chinese hackers do not lack technical savvy. They have launched cyberattacks against US presidential campaigns, expatriate Tibetan movements, and Uighur activists. They have burrowed into Western think tanks and universities that study China. They have even hacked into Western news outlets that published embarrassing stories about Chinese leaders’ wealth. Still, the Chinese may have something to learn from Russia’s well-choreographed online army of trolls and bots.

Similarly, strategists at the People’s Liberation Army (PLA) are likely poring over the Kremlin’s handiwork to inform their own cyber-war tactics. Chinese strategic thinking about “political warfare” holds that an adversary’s political, social, and economic institutions – particularly the media – should be targeted before a shooting war ever begins. To that end, Russia’s diffusion of bogus news and conspiracy theories through its state-funded media outlets RT and Sputnik could prove instructive.

In addition to expanding China’s cyber capabilities, Xi has also been developing China’s soft power through economic, social, cultural, and media initiatives. And although he has not yet coupled these programs with China’s clandestine forces to launch the kind of audacious attack that roiled the 2016 presidential election, he clearly is establishing the means to do so. Recently, it was revealed that China has been conducting wide-ranging influence operations in Australia, using official campus organizations to monitor Chinese college students, business associations to tout Chinese interests, and diplomats to police local Chinese-language media. Late last year, an Australian senator was forced to resign over his alleged ties to a Chinese billionaire.

China is also expanding its global media presence. By some estimates, the government is sinking some $7 billion into new media and broadcast outlets abroad every year. Its official news agency, Xinhua, has more than 170 bureaus around the world and publishes in eight languages. China Central Television (CCTV) has more than 70 foreign bureaus and broadcasts to 171 countries in six languages. China Radio International is the world’s second-largest radio broadcaster after the BBC, broadcasting in 64 languages from 32 foreign bureaus to 90 radio stations worldwide.

None of these organizations has yet to distinguish itself as a go-to international news source. But they have become a significant source of information for people in underserved regions such as the Middle East and Africa, where they purvey China’s views and are building sympathetic audiences.

At the same time, China is purchasing “native advertising” in Australian, American, and European newspapers. This allows China to place officially authored content about controversial issues – such as its militarized island-building in the South China Sea – next to those publications’ editorial offerings.

Xi is also playing the long game, by approving investments in movies and other forms of mass entertainment to influence how global popular culture treats all things Chinese. Despite the Chinese government’s recent clampdown on outbound capital flows, Chinese companies are still adding to their major stakes in Hollywood properties. The Chinese conglomerate Dalien Wanda alone has some $10 billion in entertainment assets in the United States, Europe, and Australia. And other Chinese Internet and financial giants such as Alibaba, Tencent, and Hony Capital, as well as state-owned companies such as the China Film Group, have invested tens of billions of dollars in US film ventures.

With these financial stakes, the Chinese government has leverage that goes beyond old-fashioned censorship. Hollywood studio bosses with an eye on China’s massive domestic market will be tempted to kowtow to the government’s “creative” requests when it comes to scripts, casting decisions, and so forth. At $8.6 billion in 2017, Chinese box-office receipts are second only to North America’s. Yet China allows only 38 foreign films into the country each year, inducing filmmakers to bend over backward to please the censors.

Of course, Hollywood executives aren’t the only Westerners helping Xi’s realize his agenda. Between Apple’s recent decision to relinquish its Chinese user data storage to a Chinese partner and Google’s announcement that it will site a new AI research center in China, US technology giants are not just making deals to benefit their “stakeholders.” They are also handing Xi and his cyber operatives proprietary technologies and know-how, and even potential access to US targets.

This raises an obvious question: If Russia could roil a US presidential election without such intimate business relationships, what will China be able to do in the years ahead? To think that China’s only interest is making money, one Hollywood executive recently acknowledged, would be “very naive and dangerous” indeed.

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Google Price Target Hiked, Big Data Seen As Its Biggest Edge

Google-parent Alphabet‘s (GOOGL) ace-in-the-hole is its competitive edge in collecting and utilizing data, one analyst said Friday after upping his price target on the internet giant.

Analyst Andy Hargreaves increased his price target to 1,280 from 1,150 per share.

“We see the potential for significant upside to our estimates from sustained growth in mobile search and YouTube, acceleration in Maps monetization, success with YouTube TV, or stricter expense management,” Hargreaves said in a note to clients. “Additionally, we believe (self-driving car business) Waymo is emerging as a global leader in automated driving software, which could be more appropriately factored into valuation.”

Google rose 0.5% to 1,142 on the stock market today. Google is up nearly 6% in 2018 and 37% from a year ago.


IBD’S TAKE: Finding the best stocks to buy can be tricky. That’s why Investor’s Business Daily makes it easy with educational tools, stock lists, research, Leaderboard and more.


Alphabet, meanwhile, on Friday announced a co-licensing pact with China’s Tencent Holdings (TCEHY).

Google reports fourth-quarter earnings on Feb. 1.

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Chinese Internet Users Start To Rebel Against Lack Of Online Privacy

We recently reported how China continues to turn the online world into the ultimate surveillance system, which hardly comes as a surprise, since China has been relentlessly moving in this direction for years. What is rather more surprising is that Chinese citizens are beginning to push back, at least in certain areas. For example, The New York Times reports on an “outcry” provoked by a division of the Alibaba behemoth when it assumed that its users wouldn’t worry too much if they were enrolled automatically in one of China’s commercially-run tracking systems:

Ant Financial, an affiliate of the e-commerce giant Alibaba Group, apologized to users on Thursday after prompting an outcry by automatically enrolling in its social credit program those who wanted to see the breakdown [of their spending made via Ant Financial’s online payment system]. The program, called Sesame Credit, tracks personal relationships and behavior patterns to help determine lending decisions.

When one of China’s business leaders complained publicly about the lack of privacy in China, and how Tencent’s hugely-popular WeChat program spied on users, the company’s denials were met with another outcry:

Tencent said that the company did not store the chat history of users and that it would never use chat history for big data analytics. The comments were met with widespread disbelief: WeChat users have been arrested over what they’ve said on the app, conversations have turned up as evidence in court proceedings, and activists have reported being followed based on WeChat conversations.

Meanwhile, the third of China’s Big Three Internet companies — Baidu — has been hit with legal action over privacy concerns, reported here by Caixin:

Baidu Inc., China’s largest search-engine operator, is being sued by a consumer-protection organization that claims it collected users’ information without consent, in the latest privacy dispute involving the country’s tech giants.

Two mobile apps operated by New York-listed Baidu, a search engine and a web browser, could access a user’s calls, location data, messages and contacts without notifying the user, the Jiangsu Consumer Council, a government-backed consumer rights association, claimed in a statement on its website.

The Chinese government may not worry too much about these calls for more privacy provided they remain directed at companies, since they offer a useful way for citizens to express their concerns about surveillance without challenging the state. It looks happy to encourage users to demand more control over how online services use their personal data — so long as the authorities can still access everything themselves.

As well as government acquiescence in these moves, there’s another reason why Chinese companies may well start to take online privacy more seriously. Аn article in the South China Morning Post points out that if Chinese online giants want to move beyond their fast-saturating home market, and start operating in the US and EU, they will need to pay much more attention to privacy to satisfy local laws. As Techdirt reported, an important partnership between AT&T and Huawei, China’s biggest hardware company, has just been blocked because of unproven accusations that data handled by Huawei’s products might make its way back to the Chinese government.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

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Internet Users in China Expect to Be Tracked. Now, They Want Privacy.

For now, it is far from clear that this rising discomfort will give way to policy changes. Many Chinese people, even as they express concerns about how companies use their data online, offer little criticism of Beijing’s desire to use that data to help compile a broad social tracking system that rewards what it regards as good citizens and punishes others.

Still, recent signs indicate Chinese consumers are beginning to express some of the same privacy concerns long found in the United States and elsewhere.

This week, one of China’s most visible business leaders bemoaned what he said was a lack of privacy in China in general, and specifically on the country’s most widely used mobile chat service, WeChat.

“There’s no privacy and information security these days,” Li Shufu, the chairman of Geely Holding Group and Volvo Cars, said at a New Year’s forum. “When you walk on the road, there are surveillance cameras everywhere.”

“Pony Ma must be reading our WeChat messages every single day,” he added, referring to the founder of Tencent, the Chinese internet giant that runs the social media and chat app, which has almost one billion users.

In a statement, Tencent said that the company did not store the chat history of users and that it would never use chat history for big data analytics. The comments were met with widespread disbelief: WeChat users have been arrested over what they’ve said on the app, conversations have turned up as evidence in court proceedings, and activists have reported being followed based on WeChat conversations.

“It has become a default setting for me now to assume that we have no privacy in the face of Alibaba and Tencent,” said Li Luyao, a college student in Beijing.

Mr. Li said he did not believe Tencent’s assurances that it was not storing chat logs, and he expressed anger at Ant Financial for resorting to what he called “old tricks.”

In its end-of-year feature, Ant Financial had customers click through a screen with a line in small font saying the user agreed to the terms of service, which were hidden. A toggle was on by default to indicate that the user agreed, and enrolled them in the Sesame Credit program.

Ant Financial said in the terms of service that it reserved the right to share the data it collected with third parties — including government agencies assembling a national, government-sanctioned social credit system — and could not be held responsible for what happened after it shared the information.

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In its statement, Ant Financial said users should have had to actively change the toggle to indicate they agreed, and added that it would remove all of those who had been inadvertently added to the credit system.

Yet, user complaints went beyond the narrow concern over how they joined, to broader questions regarding what they were asked to join.

“The tone of the agreement makes me feel so uncomfortable because every sentence literally goes, ‘If this happens, we are not responsible, if that happens, we are not responsible,’” said Zhou Yang, a 25-year old investment professional in Shanghai. “They sound like sneaky unscrupulous merchants who will sell your data and don’t want to be responsible for anything, and you have to agree to all of it.”

Ms. Zhou’s fears about data sales underscore more widespread worries about controlling personal information. China’s official media have reported an increasing number of cases of internet fraud, and personal data is widely available for sale through online marketplaces. A 2017 survey by China’s state-run Beijing Youth Daily found that leaking personal data was the No. 1 concern among consumers.

The issue has filtered to the top of the Chinese leadership. Even as Beijing continues to assemble one of the most sophisticated and wide-scale surveillance systems in the world, politicians have called for better privacy protections. Laws have been beefed up to better protect consumer data.

In part, Ant Financial might have been trying to get around newer, stricter laws that would prevent them from sharing user data unless they had explicit permission, said Zhai Zhenyi, a lawyer at Yingke, a China-based law firm.

“Problems like telecom fraud and malicious marketing have severely vexed the general public, so people’s consciousness about their rights is awakening,” he said. “This is a very good thing to see.”

But it’s not clear to what degree that consciousness extends to government collection of data, even though China’s biggest internet companies often provide user information to Beijing.

For example, Ant Financial’s credit system resembles one the government itself plans to soon implement.

Beijing has said it will introduce in 2020 its own social credit system that is expected to give and take away privileges based on spending habits, online and real-world behavior, and social relationships. Foreign travel, speedy internet, school access, and social benefits could all be granted or denied based on a person’s score. The government system will most likely be at least partly dependent on data collected by companies like Alibaba and Tencent.

It is unclear how many Chinese are truly against such programs.

Mr. Li, the Beijing college student, said that many of his friends still shared the shopping breakdowns — which now include a number indicating a user’s Sesame Credit score.

Such is the power and ubiquity of Alibaba and Tencent in China, he added, that customers would find voting with their feet and quitting the services difficult.

“Being angry doesn’t do us any good,” he said. “Maybe you can stop using Alipay if you are angry, but there’s no way you could stop using WeChat.”

Carolyn Zhang contributed reporting.

Follow Paul Mozur on Twitter: @paulmozur.

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Vietnam Deploys 10000 Cyber Warriors to Fight ‘Wrongful Views’

Vietnam is deploying a 10,000-member military cyber warfare unit to combat what the government sees as a growing threat of “wrongful views” proliferating on the internet, according to local media.

Force 47 has worked pro-actively against distorted information, Tuoi Tre newspaper reported, citing Nguyen Trong Nghia, deputy head of the general politics department under the Vietnam People’s Military. The disclosure of the unit comes as the Communist government pressures YouTube Inc. and Facebook Inc. to remove videos and accounts seen damaging the reputations of leaders or promoting anti-party views.