Microsoft in negotiations to buy TikTok from ByteDance
August 11, 2020 Category IT & Telecom, Weekly
Microsoft said it would continue talks with ByteDance to acquire the U.S. operations of popular video-sharing app TikTok, after a meeting of Microsoft CEO Satya Nadella with President Donald Trump, who already banned the app form being installed and used on smartphones issued by the government. Trump said he would ban TikTok altogether if the sale is not concluded by September 15. If the sale is successful, Microsoft would also operate TikTok in Canada, Australia and New Zealand. “Microsoft fully appreciates the importance of addressing the President’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the U.S. Treasury,” Microsoft said in a statement. It has been reported that Twitter is also interested in buying TikTok, although it would need substantial external financing to do so.
The negotiations between ByteDance and Microsoft will be overseen by the Committee on Foreign Investment in the United States (CFIUS), a U.S. government panel that has the authority to block the agreement. TikTok, which boasts 100 million U.S. users, has been a source of national security and censorship concerns for the Trump administration. In its statement, Microsoft said it may invite other American investors to participate on a minority basis in the purchase of TikTok. Financial terms were not disclosed. TikTok’s U.S. user data is stored in the U.S., with strict controls on employee access, and its biggest investors come from the U.S., the company said earlier. ByteDance’s valuation expectations for the app exceeded USD50 billion, although U.S. pressure to divest it could lower that price tag. “While we encounter mounting complexities across the geopolitical landscape and significant external pressure, our response teams have been working around-the-clock and giving up their weekends over the past few weeks to ensure the best possible outcome,” CEO Zhang Yiming said.
ByteDance said it is committed to becoming a global company despite facing “complex and unimaginable difficulties” in going global, including “the tense international political environment, collision and conflict of different cultures and plagiarism and smears from competitor Facebook.” TikTok has attracted criticism from Facebook CEO Mark Zuckerberg, who last year accused the app of censorship. TikTok has denied the claim, the Shanghai Daily reports.
President Trump said the U.S. Treasury should get a “very large percentage” of the sales price because the U.S. government is making the deal possible. China sternly condemned the plan as “political manipulation”. “This goes against the principles of the market economy and the World Trade Organization’s principles of openness, transparency and non-discrimination,” said Foreign Ministry Spokesman Wang Wenbin. “It’s outright bullying.” The national security grounds for the U.S.’s clampdown on Chinese firms “does not hold water,” he added, as the company conducted its business activities in accordance with international rules and U.S. laws. “But the U.S. is cracking down on them on trumped-up charges,” said Wang, who warned the U.S. not to “open Pandora’s box.”
While it followed a sweeping crackdown by the Trump administration on a growing list of Chinese technology companies, the “illegal and immoral” move against TikTok marks an unprecedented step in the legal and commercial arena and sounded a dire warning of how more Chinese businesses could be targeted by a “shameless” U.S. administration ahead of the presidential election, Chinese experts noted. Such a dangerous escalation warrants stern retaliation from the Chinese government, including taking a proportionate, reciprocal countermeasure on U.S. businesses in the Chinese market, to make it clear to the U.S. administration that its reckless behavior won’t go unchecked, the experts urged, adding that without concrete countermeasures, the U.S. President could further step up crackdowns on more Chinese firms and could even pick fights in other geopolitical areas, the Global Times adds.
Following TikTok, President Trump is also planning to ban WeChat, another popular Chinese social messaging app. President Trump issued an executive order to ban any U.S. deal with Tencent, the operator of WeChat, after 45 days, or starting on September 20. Banning WeChat would also have a huge impact on Apple. As one of the largest markets for Apple, some 20% of iPhone sales globally are from China, and taking WeChat off the App Store “would be a serious hindrance,” Anand Srinivasan, Analyst with Bloomberg Intelligence said.
On Chinese social media platforms, many declared the end of the U.S. as a free market and a country ruled by the law, calling the move “naked robbery”. “This is a Chicago mafia-style way of doing things, pure and simple: Pointing a gun at your head and ordering you to make a deal,” Shen Yi, Professor at the School of International Relations and Public Affairs at Fudan University, told the Global Times. “There is no point in discussing the legality of the move because there is none. It’s utterly immoral.”
Despite the fact that China-U.S. relations are currently in the worst shape since the establishment of diplomatic relations on January 1, 1979, Chinese Foreign Minister Wang Yi said that “China is ready to restart the dialogue mechanisms with the U.S. side at any level, in any area and at any time. All issues can be put on the table for discussion.” According to the Global Times, this shows China’s consistent stance: It has no intention of escalating tensions with the U.S. and is willing to cool down the situation. Meanwhile, U.S. Health and Human Services Secretary Alex Azar has paid a visit to Taiwan and met with Taiwan’s President, Tsai Ing-wen, in the highest-level U.S. visit in more than four decades, pledging “strong support and friendship” from President Donald Trump, further aggravating China-U.S. relations.
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