LeTV-jia

LeTV, China’s online video streamer eyeing on booming smartphone market, has acquired an 18% stake in smartphone maker Coolpad Group Ltd. with $2.73 billion HKD (about $350 million USD) through its smartphone business subsidiary Leview Mobile HK Ltd. This purchase will make LeTV the second largest shareholder of Coolpad, the company added.

Cooperation with Coolpad, which has around 5,000 patents related to mobile applications, telecommunications and dual SIM card technologies, will complement LeTV’s forces in smartphone manufacturing, R&D, sales channels and after-sales service. On the other hand, the rich video contents from LeTV will help Coolpad to accelerate its development.

In the meanwhile, the tie-up brings a dramatic turn to Coolpad’s partnership with Chinese software giant Qihoo 360, which has taken the cooperation with Coolpad as an important frontier to push forward its smartphone business.

As a new entrant to smartphone sector, Qihoo 360 established joint venture Qiku with Coolpad at the end of 2014. Smartphones manufactured by the joint venture are shipped under brand Dazen, a low-end sub-brand of Coolpad. This year, Qihoo increased its stake in the joint venture from 45% to 49.5%.

Qihoo has spent overall $450 million USD for a non-controlling stake in the joint venture Qiku, whereas LeTV acquired an 18% stake in Coolpad, the parent company, with $350 million USD. It is obvious that it isn’t a good deal for Qihoo.

In response to the LeTV-Coolpad investment news, Qihoo’s CEO Zhou Hongyi released an internal email that include a series of adjustments in Qiku’s senior management team and the plan for an upcoming smartphone launch.

zhouhongyi-1Coolpad’s partnership with LeTV seems to have enraged Zhou who responded the news with a resentful WeChat status “Whoever stabbed me in the back to screw me up, my principle is that I will definitely fuck back.”

The three parties represented two major forces in China’s smartphone market: Coolpad, a veteran smartphone maker,  LeTV and Qihoo, two internet giants excelled in video contents and internet channels, respectively.

Wang Yanhui, secretary general of China Mobile Committee, commented that there will be little cooperation space for LeTV and Qihoo given the industry status of the two company and the characters of their CEOs. He predicted that Qihoo will increase further increase investment in Qiku for a controlling stake.

image credit: LeTV