Huawei, Tencent near deal to exclude WeChat from revenue sharing

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Huawei Technologies Co is nearing a deal to let Tencent Holdings Ltd’s WeChat super app operate fully on its Harmony mobile platform without sharing any revenue, a concession designed to defend its newfound lead over Apple Inc in China.

The deal, in which Huawei will agree not to charge Tencent any fee for in-app transactions within the WeChat universe, comes after months-long negotiations between the two Shenzhen-based tech behemoths, according to people with knowledge of the matter. They declined to be named discussing private corporate information.

The arrangement will likely make WeChat a rare exception in Huawei’s plan to start charging a fee for content and services on its app store. Huawei is considering taking a cut of in-app purchases on its Harmony platform, and it has been discussing a fee of about 20% with game developers, Bloomberg News reported earlier this week.

In return, Tencent will maintain and update the WeChat app that hundreds of millions of Chinese rely on daily for everything from payment to gaming, the people said.

The agreement, once sealed, would also be a boon for Tencent as it looks to drive more sales from WeChat’s mini programs, its platform for lite-versions of popular apps such as Didi. Tencent generated 1.5 trillion yuan (RM973.46bil or US$207bil) in gross merchandise value from its mini programs in the September quarter last year.

Currently users can download and use WeChat on Huawei handsets, but the two companies do not have a formal arrangement that obligates Tencent to provide regular updates to the app. The deal, which will not create a perceivable change for phone owners, also requires Huawei to continue to host and support WeChat.

The talks are ongoing and the two sides could still fail to agree on a deal, the people said. Huawei shifted to its in-house Harmony OS after US sanctions cut it off from working with Google, the proprietor of Android.

Striking a deal is particularly crucial for Huawei because the company is moving to a new version of Harmony that may lose access to WeChat if Tencent didn’t continue to support the app. The agreement helps ensure that WeChat will be ready when Huawei makes its transition.

Huawei has also reached out to ByteDance Ltd’s Douyin in an attempt to discuss revenue sharing, but the Beijing-based social media company has not expressed any interest in opening talks, said one of the people.

Huawei, Tencent and ByteDance did not respond to requests seeking comment.

Huawei’s negotiation with Tencent emerged from a broader effort to begin monetising its smartphone platform, which just overtook Apple’s iOS in terms of market share in China. Apple also doesn’t take a cut of WeChat transactions but it does levy a 30% commission on purchases of WeChat Beans, a virtual currency users can spend on various in-app features such as tipping a livestreamer, according to the people with knowledge of the matter. Apple did not respond to requests seeking comment. – Bloomberg

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