China Unicom partnering up with Alibaba

Customers try virtual reality devices at the China Unicom stand at a telecoms exhibition in Guangzhou, Guangdong province. [Photo/China Daily]

China United Network Communications Ltd said it has partnered with internet giants in a move to arrest its continuing profit decline and speed up its shift toward the mobile internet.

China Unicom, the country's second-biggest telecom carrier, made the remarks on Saturday after it inked a strategic partnership with e-commerce giant Alibaba Group Holding Ltd to cooperate on basic telecommunication services, mobile internet and industrial internet.

Wang Xiaochu, chairman of China Unicom, said the all-round deep cooperation between China Unicom and Alibaba has a solid foundation. Jack Ma, founder and chairman of Alibaba, said he has high expectations for the cooperation deal.

China Unicom also signed a strategic cooperative agreement with Baidu Inc on Nov 2, to cooperate on projects in mobile internet, artificial intelligence, big data and telecom services.

Baidu aims to help China Unicom put the services of its bricks-and-mortar outlets and franchised stores online. China Unicom will offer Baidu stronger telecom infrastructure support, including internet data centers and information and communication technology.

The cooperation between China Unicom and internet giants comes after the National Development and Reform Commission selected China Unicom to be among the first batch of enterprises for the pilot mixed ownership reform.

Chinese local media recently reported that China Unicom would likely attract private investors to participate in its reform.

"China Unicom has rich network resources, but it has the fewest 4G users compared with its rivals, including China Mobile Communications Corp and China Telecommunications Corp," said Peter Liu, research director at consultancy Gartner Inc.

"There is an urgent need to find new users and data flow portals," he said.

Liu said the cooperation was a positive move, which would see both sides benefitting from each other's strengths and would enhance China Unicom's core business competitiveness.

Xiang Ligang, CEO of telecom industry website cctime.com, said it was an inevitable trend that internet companies partnered with telecom carriers.

"It is expected that this cooperation will boost China Unicom's 4G user base," he said.

Xiang said the mixed ownership reform is a very complex process, involving share purchases and a change of operational modes and needed time to implement.

Analysts said China Unicom, whose 4G subscribers accounted for 28 percent of China's total at the end of June, is likely to continue to face heavy marketing costs that will weigh on profits.

Its 4G subscribers reached 72.4 million in June, up by more than 46 percent compared with the number in January, while China Mobile's 4G subscribers were 429 million in June.