Some of China’s state-backed telecommunications companies are keen on investing in Alibaba Cloud, said sources familiar with the matter.
Alibaba Group Holding Ltd.’s cloud computing division, Alibaba Cloud, is considering a private round of fundraising from Chinese state-owned enterprises before making a debut in Hong Kong.
Sources familiar with the matter stated that Alibaba Cloud is working with advisers to raise about 10 billion yuan to 20 billion yuan ($1.4 billion to $2.8 billion). Some of the prospective investors include state-backed telecommunication companies.
Earlier this year in May, Alibaba said that the company was planning to spin off the cloud division through a stock dividend distribution to shareholders with a 12-month holding period.
Discussions are in the early stages, and specifics regarding the funding, such as the amount and timing, may undergo modifications, according to insiders who wished to remain anonymous due to the confidential nature of the information. A spokesperson for Alibaba did not provide a response to an email request for comment. Additionally, representatives for China’s three primary state-owned telecommunications companies did not reply to requests for comment.
This decision follows Alibaba’s announcement of its intention to divide into six largely independent entities, including logistics and smart retail, all planned for initial public offerings. The potential listing of the Cloud Intelligence Group is part of the company’s restructuring. However, it would not involve raising fresh capital through public share offerings. Instead, the sale of stakes to state-owned enterprises could serve to address Beijing’s security concerns associated with the business.
Established in 2009, Alibaba Cloud is the Chinese equivalent of Amazon Web Services and offers data processing and storage solutions to businesses, developers, and governmental bodies worldwide. Over the 12 months ending on March 31, Alibaba Cloud contributed $11.2 billion in revenue to Alibaba, excluding payments from other entities within the conglomerate.
Navigating through Regulatory Challenges
Alibaba Cloud has faced regulatory scrutiny, including an investigation into its involvement in China’s largest cybersecurity data breach, and has also seen competition from rivals like Huawei Technologies Co. and China Mobile Ltd. Nevertheless, Alibaba Cloud remains a resilient enterprise, steadfastly expanding its array of services.
According to its website, Alibaba Cloud provides data processing and storage solutions to numerous businesses, developers, and governmental bodies across more than 200 countries and regions.
In July, the company unveiled the Tongyi Wanxiang large language model at a conference. This generative AI model, whose name translates to “10,000 images,” has the capability to produce a wide range of visuals, encompassing animations, sketches, and 3D cartoons, as detailed in a company statement.
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