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Huawei Technologies is nearing an agreement to let Tencent's (OTCPK:TCEHY) (OTCPK:TCTZF) WeChat super app operate fully on its mobile operating system HarmonyOS without sharing any revenue, Bloomberg News reported.
The move is potentially aimed at defending its newfound lead over Apple (AAPL) in China. Under the potential agreement, in which Huawei will not charge Tencent any fee for in-app transactions within the WeChat universe, comes after discussions between the two Chinese tech giants which spanned across months, the report added citing people familiar with the matter.
Reportedly, Huawei has been thinking of charging fees for in-app purchases on HarmonyOS, indicating growing confidence in competing with Apple in the smartphone space. The company has been mulling charging a commission lower than the usual 30% cut that Apple and Alphabet's (GOOGL) (GOOG) Google charge for payments made through their mobile stores for apps, games, movies and music subscriptions, among other things.
Until now, Huawei had not charged fees in Harmony OS as an incentive to bring developers and publishers on board.
The deal with Tencent would likely make WeChat a rare exception in Huawei's plan to start charging a fee for services on its app store.
In return, Tencent will maintain and update the WeChat app, on which millions of people in Chinese depend for payment and gaming, among other things, the report added.
Currently, users can download WeChat on Huawei phones and use it, but there is no deal which obligates Tencent to provide regular updates to the app. The agreement, which is expected to not have an impact on phone owners, also requires Huawei to continue to host and support WeChat.
The potential agreement is important for Huawei as well, because the company is moving to a new version of Harmony which may lose access to WeChat if Tencent does not continue to support the app.
The deal could be beneficial for Tencent as it looks to generate more sales from WeChat's mini programs, its platform for lite-versions of popular apps like Didi. Tencent generated 1.5T yuan (about $207B) in gross merchandise value from its mini programs in the September quarter last year, according to the report.
The discussions are ongoing, and the two companies could still decide not to go ahead with the deal.
Huawei has also reached out to ByteDance's (BDNCE) Douyin, a Chinese sister app of TikTok in an attempt to discuss revenue sharing, but ByteDance has not shown interest in opening talks, the report added.
Huawei moved to self-built Harmony OS after U.S. sanctions restricted it off from working with Google, the maker of Android operating system.
Harmony OS overtook Apple's iOS in terms of market share in China in the first quarter of 2024 (January-March), as the country's customers lined up to buy Huawei's flagship phones, according to Counterpoint Research.
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