Alibaba reportedly in talks to buy ZTE's software arm for cloud unit

Alibaba is investing billions in expanding a cloud computing business that competes with Amazon.com Inc. and Microsoft Corp.
Alibaba is investing billions in expanding a cloud computing business that competes with Amazon.com Inc. and Microsoft Corp. PHOTO: REUTERS

BEIJING (BLOOMBERG) - Alibaba Group Holding is closing in on a deal to acquire Chinese telecommunications gear maker ZTE Corp's software subsidiary, an acquisition that could help strengthen its global Internet computing business, people familiar with the deal said.

China's leading e-commerce operator has been in negotiations to buy ZTEsoft Technology for months and is nearing an agreement, according to one of the people, who asked not to be identified, discussing a private deal. Alibaba could pay between 2 billion yuan (S$407.7 million) and 3 billion yuan for a division that provides software support and services to carriers around the world, another person said.

Alibaba, which grew to become one of China's two biggest corporations alongside a boom in online shopping, is investing billions in expanding a cloud computing business that competes with Amazon.com Inc and Microsoft Corp. That effort would benefit from ZTEsoft's global client portfolio and relationships with wireless carriers from Europe and Africa.

A sale will also help replenish ZTE's coffers, depleted by a record US$1.2 billion (S$1.39 billion) fine levied this year by the United States government for violating sanctions on technology exports. The company is vying with larger rival Huawei Technologies for contracts to build fifth-generation networks in China and around the world, an effort that will soak up billions for research and development alone.

Alibaba and ZTE declined to comment. ZTE's Nanjing-based subsidiary, which provides business and operations support to clients such as Orange and KPN, has said its software has been deployed in more than 70 countries.