The top Chinese wireless Internet service provider Tom Online is planning a 51-49 joint venture with the Chinese arm of US e-commerce giant eBay Inc, according to reports on sina.com.

 

Tom Online could announce the deal as early as tomorrow in Shanghai, where eBay China is based, according to an email from a source claiming to be an eBay China employee.

 

The firm, listed both on the Growth Enterprise Market in Hong Kong and the NASDAQ in New York, has been rumored to be in merger talks with eBay China for the past two years.

 

The stock price of Tom Online on the NASDAQ rose by more than 10 percent since the beginning of this month and reached its five-month high of US$16.40 on December 12, mainly due to merger reports.

 

The source, whose email was posted by a popular blogger on sina.com, said the two firms have prepared press releases and will be making an announcement on Wednesday.

 

The email said Tom Online will form a 51-49 joint venture with eBay China, to be controlled by Asia's richest man, Li Ka-shing.

 

The email said the US web giant would inject its' auction site into Tom's platform, as well as invest US$105 million for a 33 percent stake in UMPay, a mobile payment firm controlled by the government-backed online payment provider China UnionPay and the country's dominant wireless operator, China Mobile.

 

Both eBay China and Tom Online declined to comment on the email and merger reports.

 

The two firms have been facing huge challenges in the Chinese market and have been seeking ways to get out of their troubles.

 

Slow progress in localization is believed to be eBay's biggest problem. Its competitor Taobao.com, which has Yahoo! as its biggest investor, provides free services, advertises on TV, and has partnered with local banks and logistics firms. EBay China, meanwhile, has a management team led by expatriates, has focused only on online advertisement to attract new users, and continues to charge fees.

 

In 2002, eBay China spent US$180 million to acquire Shanghai-based Eachnet.com, and since then has spent over US$100 million to expand its business. But prospects for profits are still dim, and it has been reported eBay China would like a Chinese partner to help operate its business here.

 

Tom Online, feeling the brunt of regulatory pressures from the Chinese Government and mobile operators, is desperate to find new revenue pools other than its wireless Internet services.

 

(China Daily December 19, 2006)