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BEIJING (Reuters) – Chinese telecoms equipment group ZTE Corp hit back on Thursday against concerns from U.S. lawmakers that it is a vehicle for Chinese espionage, saying it was a trusted partner of its U.S. customers, state news agency Xinhua reported.
China is trying to gain access to sensitive U.S. technologies and intellectual properties through telecommunications companies, academia and joint business ventures, U.S. senators and spy chiefs warned on Tuesday.
Republican Senator Richard Burr, chairman of the Senate Intelligence Committee, said he was concerned about the ties to the Chinese government of Chinese telecoms companies like Huawei Technologies Co Ltd and ZTE.
“ZTE is proud of the innovation and security of our products in the U.S. market,” Xinhua cited a ZTE spokesman as saying.
The company takes cybersecurity and privacy seriously, has always adhered to laws and remains a trusted partner of U.S. suppliers and customers, the company added.
“As a publicly traded company, we are committed to adhering to all applicable laws and regulations of the United States, work with carriers to pass strict testing protocols, and adhere to the highest business standards,” it said.
Last week, Republican Senator Tom Cotton and Republican Senator Marco Rubio introduced legislation that would block the U.S. government from buying or leasing telecoms equipment from Huawei or ZTE, citing concern the companies would use their access to spy on U.S. officials.
In 2012, Huawei and ZTE were the subject of a U.S. investigation into whether their equipment provided an opportunity for foreign espionage and threatened critical U.S. infrastructure – something they have consistently denied.
Allegations of hacking and internet spying have long strained relations between China and the United States. In 2014 then FBI Director James Comey said Chinese hacking likely cost the U.S. economy billions of dollars every year.
China has strongly denied all U.S. accusations of hacking attacks.
Reporting by Ben Blanchard; Editing by Stephen Coates
HONG KONG (Reuters) – China’s Ant Financial Services Group is planning to raise up to $ 5 billion in fresh equity that could value the online payments giant at more than $ 100 billion, people familiar with the move told Reuters.
A fundraising would bring Ant, in which e-commerce firm Alibaba Group Holding Ltd is taking a one-third stake, a step closer to a hotly anticipated initial public offering by establishing a more current valuation.
Ant’s last fundraising in 2016 valued the owner of Alipay, China’s top online payment platform, at about $ 60 billion. The new round should start with a valuation of between $ 80 billion to $ 100 billion, the people said.
Ant is currently in talks to appoint advisers for the fundraising which is expected to be launched in the next couple of months, they added.
Ant declined to comment on its fundraising plans. All the people spoke to Reuters on the condition they not be identified due to the sensitivity of the issue.
While no timetable for an IPO has been set, nor any location yet chosen, Ant’s plans are being viewed as a pre-IPO fundraising, the people said. A pre-IPO round is an increasingly common move by sought-after Chinese companies to establish valuations and widen their investor base ahead of going public.
It was not immediately clear how the company plans to use the fresh cash.
The exact timing and size of the fundraising still depends on investor feedback but any deal will add to an already hectic pace of domestic and offshore fundraising by Chinese tech firms that are looking to expand both at home and abroad.
Chinese e-commerce firm JD.com is raising funds for its logistics unit with a target of attracting at least $ 2 billion, while live-video streaming start-up Kuaishou is nearing the close of a $ 1 billion funding round, sources have said.
Ant’s own existing investments include stakes in Paytm, the Indian mobile payment and e-commerce website, and Thai financial technology firm Ascend Money.
Last month, however, Ant suffered a setback when a U.S. government panel rejected its $ 1.2 billion offer for money transfer company MoneyGram International over security concerns.
At home, in addition to its core online payments business, which Ant says has 520 million yearly users, the company also offers wealth management, credit scoring, micro lending and insurance services.
Last week, Alibaba announced it would take a 33 percent stake in Ant – replacing the current system where Alibaba receives 37.5 percent of Ant’s pre-tax profit – in what was viewed as an important step ahead of any IPO.
Alibaba set up Alipay in 2004, modeling the business on PayPal, to help Chinese buyers shop online, and later controversially spun it off ahead of its own listing in 2014. Jack Ma, Alibaba’s founder, controls Ant, according to Alibaba filings with the U.S Securities and Exchange Commission.
Ant is considered by some analysts as one of the most valuable Alibaba assets due to its unique position in Chinese e-commerce.
Current shareholders in Ant include large state-owned institutions such as China Life Insurance, China Post Group – parent of Postal Savings Bank of China – and a unit of China Development Bank.
Reporting by Sumeet Chatterjee and Julie Zhu; Additional reporting by Kane Wu; Editing by Muralikumar Anantharaman and Edwina Gibbs
HONG KONG (Reuters) – China’s Leshi Internet said about 5.62 billion yuan ($ 890 million) of its debts would be due by the end of this year, or almost two-thirds of the company’s total loans and liabilities, sending its shares down for a ninth day.
This is the first time the video-streaming firm – which is battling the fallout from a severe cash crunch at its founder Jia Yueting’s embattled technology conglomerate LeEco – has provided an estimate for its debt in 2018.
Earlier, the company had said that a part of its total loans and financial liabilities of 9.29 billion yuan ($ 1.5 billion)would be due this year, without giving any further details.
Leshi shares plunged by the daily limit of 10 percent on Monday. Nine days of declines, since the stock resumed trading in January after a nine-month suspension, have knocked 37.5 billion yuan off the company’s market capitalization, that is currently at 23.7 billion yuan.
At its peak in 2015, Leshi was valued at 153 billion yuan.
Just last week, Leshi flagged that it expected a loss of 11.6 billion yuan for 2017, more than five times its combined profits since listing on the Shenzhen stock exchange in 2010, due to the ongoing crisis at LeEco.
LeEco was once China’s Netflix-to-Tesla contender but ran into a cash crunch since late 2016 after expanding too fast. Leshi used to be the main listed unit of the conglomerate.
But under the control of property developer Sunac China – its second-largest shareholder, Leshi is now trying to distance itself from the LeEco brand.
Leshi says its largest shareholder Jia and related LeEco units owe it 7.5 billion yuan ($ 1.19 billion). LeEco disputes the figure.
Shares of Sunac plunged as much as 6 percent, lagging a nearly 2 percent fall for the benchmark index.
Reporting by Sijia Jiang; Editing by Himani Sarkar
HONG KONG (Reuters) – Chinese video-streaming firm Leshi Internet Information & Technology said it expects a net loss of 11.6 billion yuan ($ 1.83 billion) for 2017, citing a cash crunch at embattled technology conglomerate LeEco that hurt its revenues.
Leshi had reported a profit of 554.8 million yuan in 2016.
It was once the main listed unit of LeEco which was founded by Jia Yueting. Last year, property developer Sunac China became Leshi’s second-largest shareholder and Jia subsequently resigned as chairman and CEO from the company but remains its largest shareholder.
Leshi is trying to recover debt owed by Jia. It said last week it is seeking equity stakes in the car businesses of Jia for debt owed by him and his companies amounting to as much as 7.5 billion yuan ($ 1.17 billion).
Leshi flagged the expected loss for 2017 in a statement to the Shenzhen stock exchange on Tuesday evening.
The announcement sent Leshi’s shares plunging by the daily limit of 10 percent on Wednesday, the sixth consecutive day they have tumbled the maximum allowed since resuming trading a week ago following a 9-month suspension.
(This version of the story corrects fifth paragraph to show announcement was made to Shenzhen stock exchange, not Hong Kong stock exchange)
Reporting by Sijia Jiang; Editing by Anne Marie Roantree and Muralikumar Anantharaman
HONG KONG (Reuters) – A Hong Kong arm of embattled Chinese tech conglomerate LeEco has filed a petition to the territory’s high court to wind up the company, media in the Asian financial hub said on Thursday.
LE Corporation Limited, a unit of LeEco, has applied to liquidate the business according to court documents, government-owned Radio Television Hong Kong and other local media said.
LE Corporation could not immediately be reached for comment. The customer service hotline listed on its website did not appear to be working.
LeTV Sports Culture Develop (Hong Kong) CO. Limited, another LeEco unit in Hong Kong that broadcasts sports events, said on its Facebook page that its operations were unaffected by LE Corporation’s application for liquidation as it is a separate entity.
It said it would continue its NBA basketball and Premier League soccer broadcasting business in the city under the brand name LeSports HK.
LeEco, an entertainment, electronics and electric vehicles group founded by Jia Yueting, has struggled to pay its debts after rapid expansion led to a cash crunch, share price plunge and multiple defaults.
In Hong Kong, LeEco sold smart phones, internet TVs and online content. At its peak in early 2016, the group employed hundreds across several subsidiaries in the city, which was its Asia Pacific headquarters.
Cheng Shisheng, a Beijing-based spokesman for LeEco, told Reuters by phone that he now only works for LeEco’s car business and declined to comment on all matters related to LeEco Hong Kong’s situation.
Reporting by Sijia Jiang; Editing by Clarence Fernandez and Keith Weir
This will be a four-part series on China’s rapid technological growth in the past few years. Each part will focus on a different investment you could make today in order to get a piece of China’s booming technology sector.
If you spend any amount of time in Beijing or Shanghai, you’ll notice something interesting almost right away. No one is carrying cash or credit cards, and almost no one uses their cellphone number as their primary means of communication. Instead, they’re using an app called WeChat, which is similar to having Facebook (FB), PayPal (NASDAQ:PYPL), Skype, and text messaging all bundled together into one app. Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) owns this application, which has over 950 million active users.
Tencent’s revenue growth has been astounding, and analysts expect that trend to continue into the future:
The reason for this massive growth is because Tencent owns people’s screen time in China. Whether you’re paying bills, playing a game, talking with friends, or hailing a taxi, you never have to leave Tencent’s world.
Speaking of games, Tencent also just happens to be the world’s leader in mobile gaming based on revenues. It’s currently ahead of Apple (AAPL), Microsoft (MSFT), Sony (SNE), King (KING), Electronic Arts (EA), Zynga (ZNGA), etc. What’s even more impressive is that despite being the top player in this area, it still grew its gaming revenue by 39% in the past year, and its market share in the space is continuing to increase.
Tencent has accomplished this dominance in the gaming sphere by partnering with a lot of the major players in the space to bring online versions of FIFA, Call of Duty, NBA 2K, and other extremely popular games to China.
Another interesting area where Tencent operates is streaming. Basketball is a perfect example of its foresight into this space. The popularity of the sport in China has exploded over the past decade, thanks in large part to Yao Ming. So what did Tencent do? It went out and struck a deal with the NBA to stream games in China. 65 million people watched the NBA finals last year from their phones in China through Tencent.
Besides gaming and streaming, Tencent’s other two major areas are social networks and advertising, which grew by 51% and 55% in the past year, respectively. Tencent is a $ 488 billion company that is still growing like a start-up. If you scroll back to the revenue chart above, you’ll see that the company’s revenue is expected to double by 2019.
Tencent’s social networks are particularly interesting to me. We’ve already discussed WeChat a little, but it has another app called QQ that has 850 million active users. Both QQ and WeChat together dominate China’s mobile payment space. Today, QQ and WeChat have over 300 million bank accounts linked to their mobile payment system.
As if all this wasn’t enough, QQ also has an application called QQMusic, which is considered to be the Spotify of China. This is an area where I anticipate Tencent will see a lot of growth moving forward.
Tencent has numerous potential catalysts that could push the stock price higher, but there are a handful that I want to specifically point out that are quite promising.
The first is in the gaming space, specifically with e-sports. China has the world’s largest video game market, which is expected to generate about $ 27.5 billion in sales this year. This incredibly large video game market has spurred an immense interest in e-sports in China and other Asian countries. In fact, the Olympic Council of Asia recently announced that it would be including e-sports at the Asian Games in Hangzhou in 2022.
E-sports have grown so popular in Asia that a crowd of more than 40,000 people recently packed into a stadium to watch two of South Korea’s biggest gaming stars play each other head-to-head. Tencent has a stranglehold on this market. The company recently signed a deal with the city of Wuhu to build an e-sports university and a stadium for events.
Tao Junyin, the market director of a top e-sports content company recently said, “Tencent has a controlling power in the whole industry, so we have to find a way to work with Tencent. You either die or you go Tencent.” Tencent has a stranglehold on the e-sports market in Asia and will benefit tremendously from its rapid growth.
Another area where the company could see growth is the music streaming space. Tencent owns QQ music, KuGou, and Kuwo, which together make up over 75% of China’s music streaming market.
Tencent has exclusive online distribution deals with Sony Music, Warner Music Group, and Universal Music Group. Its deals with the three largest music labels and dominance of market share put Tencent in a great position to control China’s music streaming market, which is relatively immature at the moment.
While China is the world’s most populous country, with over 1.3 billion people, it is only 12th in the world in terms of recorded music revenue. That’s up from 14th in 2015 according to the International Federation of Phonographic Industry (IFPI). This jump was largely due to the 30.6% growth in streaming and China’s 20.3% growth in music revenue, which was almost four times the 2016 global average of 5.9%.
Despite these impressive growth numbers, China’s music industry is still lagging behind the rest of the world. This gap won’t last forever, and as China begins to catch up with everyone else, Tencent stands to be the main beneficiary.
Finally, I just wanted to quickly point out that China’s mobile internet use is only expected to grow faster in the coming years, something that will clearly benefit Tencent.
There are two main risks I want to point out before you invest your money into Tencent. The first is its valuation. After everything we just discussed, it should be no surprise that you’re going to have to pay a premium to get into this name. Tencent’s 51.69 P/E ratio currently reflects that.
Tencent has enjoyed a nice run-up over the past year, so some short to medium-term weakness certainly wouldn’t surprise me. If you plan on investing money that you may need within the next year, Tencent might not be the best investment for you. That being said, I’m a long-term investor, so some short to medium-term weakness would allow me to add to my current position at a cheaper price.
The second risk comes with investing in almost any Chinese company, and that’s the risk of regulation. Any regulations in China dealing with the internet could make life more difficult for Tencent and potentially limit its capabilities.
Tencent seems to be doing everything right. They are major players in almost every facet of China’s tech revolution, which is why some people expect Tencent to become the world’s biggest company by 2025.
If you want to own some of China’s technology revolution, Tencent is one of the best places to start. Stay tuned for Part 2 of this series coming in the next few days.
Author’s note: If you would like to follow along with my China Series and other analysis, I would encourage you to hit the follow button next to my name at the top of the page. I enjoy interacting with my followers, so please comment below!
Disclosure: I am/we are long TCEHY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
(Reuters) – China’s Tencent Holdings Ltd has bought a 12 percent stake in Snapchat parent Snap Inc, a regulatory filing showed on Wednesday.
Snap said Tencent acquired 145.8 million shares of its non-voting Class A common stock through open market purchases this month. bit.ly/2zqvybE
Snap had about 1.2 billion shares outstanding.
Reporting by Arjun Panchadar in Bengaluru; Editing by Sai Sachin Ravikumar