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Tencent accused of price distortion with 0.01 yuan bid

Thu 30 Mar 2017

Tencent has been accused of price distortion and unfair competition after it submitted a bid for just 0.01 yuan to provide cloud computing services to the city of Xiamen.

The city government had budgeted 4.95 million yuan for the one-year contract. Tencent won the bid, beating out China Telecom, who offered a bid of 1.7 million yuan and China Unicom, at 3.1 million. A host of smaller networking and communications companies had offered bids within this range as well, but none could match the 0.01 yuan bid from Tencent.

Tencent, owners of the China’s most popular messaging service, WeChat, have wide and varied income streams throughout the technology and communications markets in Asia. In year-end financial reports released this month, the company posted $2.19 billion USD in annual revenue, the largest year over year increase since 2012.

While his company did not offer a bid to the Xiamen city government, Hu Xiaoming, President of Alibaba Cloud said that the offer of 0.01 yuan was irresponsible, and affects the cloud computing market as a whole.

“As cloud computing becomes the choice of an increasing number of big companies, we should think about how to provide valuable technology and services to the customers,” he said, during the company’s 2017 Cloud Computing conference. “When everyone wants to contribute to the industry through personal success, [Tencent has] destroyed the entire industry with the 0.01 yuan offer.”

In an email, a representative for Tencent said that the contract with the city of Xiamen was not representative of the future direction of Tencent Cloud.

“As cloud computing business remains at its investment period, it’s impossible to carry out businesses completely free of charge, due to the high costs in the short term,” Tencent said, citing founder Ma Huateng.

Tencent was a relatively late entrant into cloud computing in Asia but it is experiencing dramatic growth in the cloud market, contributing to the corporation’s 48% growth in revenue over the last year.

The statement from Tencent implies that the company does not plan to build a business model undercutting the competition in such a dramatic manner as the Xiamen bid, however, should it choose to do so, few other companies can afford to compete.

Earlier this week, Tencent announced a partnership with NVIDIA to bring AI to cloud computing in China. The company will integrate GPU computing from NVIDIA with the Tencent public cloud platform, to encourage the adoption of AI technology in China.

Tags:

Alibaba Asia business China Cloud government news tencent
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