Shares in Tencent (0700.HK), owner of the QQ instant messaging platform, climbed 5.4% Wednesday afternoon following conflicting reports regarding a potential investment in the company from China Mobile (0941.HK, CHL.NYSE). Wang Jianzhou, chairman of China Mobile, apparently said the company had not ruled out purchasing an equity stake in Tencent. A China Mobile spokeswoman later said that Wang misspoke.
Rumors have recently swirled regarding a possible merger, as a combination of the two companies – China’s largest mobile provider and largest IM provider respectively – would offer extensive synergies. Unifying established internet platforms like QQ, which has over 300 million users, with China Mobile’s handsets would provide an unparalleled mobile experience as the country adopts 3G and enters a period of mobile and internet convergence. At the same time, Tencent perceives Google’s anticipated withdrawal from China as an opportunity to advance its own search engine through China Mobile’s 500 million-plus subscribers.
If a merger does occur, mobile carriers China Telecom (0728.HK, CHA.NYSE) and China Unicom (0762.HK, 600050.SH, CHU.NYSE) would both have to scramble to provide alternative messaging services or risk paying money to their direct competitor China Mobile. Tencent would also gain ground on internet leader Baidu while offering mobile integration which competitors Sohu (SOHU.NASDAQ) and Sina (SINA.NASDAQ) could not match.