Alibaba may buy ZTEsoft to boost its position with telcos

Since its huge US IPO, Chinese ecommerce giant Alibaba has been building up its armory to take on its western counterpart, Amazon, in cloud and mobile services. Its latest move is reported to be a plan to acquire ZTE’s software division, ZTEsoft, for about $440m.

Bloomberg sources claim that negotiations have been going on for months and are close to fruition. The deal would help Alibaba extend its cloud activities outside China to step up the challenge to Amazon Web Services and Microsoft Azure, taking advantage of ZTE’s established relationships with European and African telcos. That could accelerate Alibaba Cloud’s moves to add further operators to its roster, having already signed up Vodafone as a customer.

ZTEsoft was spun off as a standalone unit last year and has its shares listed on China’s NEEQ exchange. It sells OSS/BSS and related services to telcos and IoT systems to enterprises and governments. It claims to have over 120 operator customers in 80 countries and last year it reported revenues of CNY1.93bn ($285m) and a net profit of CNY130m ($19.2m). Its customers include Orange and KPN.

Alibaba Cloud will soon open new data centers in Mumbai, India, Jakarta, Indonesia, and Malaysia. Those will bring its total to 17 data centers, with locations in mainland China, Australia, Germany, Japan, Hong Kong, Singapore, the UAE and the US. For its financial year ended on March 31 2017, it reported cloud services revenues up 121% year-on-year to $968m, with an operating loss of $244m.

According to IDC, Alibaba is the fourth largest cloud infrastructure services provider after AWS, Microsoft and IBM. Though its market share of 3.2% is dwarfed by AWS’s 46%. However, Microsoft’s 7.6% and IBM’s 5.8% will be easier to catch, while Google lags in fifth place with 2.9%.