(Bloomberg) — Huawei Technologies Co. is closing in on a deal to let Tencent Holdings Ltd.’s WeChat super app operate fully on its Harmony mobile platform without sharing any revenue, a concession designed to defend its newfound leadership over Apple Inc.
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The deal, in which Huawei will agree not to charge Tencent any fees for in-app transactions within the WeChat universe, comes after months of negotiations between the two Shenzhen-based technology giants, according to people with knowledge of the matter. They declined to be identified discussing private corporate information.
The deal will likely make WeChat a rare exception to Huawei’s plan to start charging fees for content and services in its app store. Huawei is considering reducing in-app purchases on its Harmony platform and has been discussing a fee of around 20% with game developers, Bloomberg News reported earlier this week.
In return, Tencent will maintain and update the WeChat app, which hundreds of millions of Chinese rely on daily for everything from payments to gaming, the people said.
The deal, once sealed, would also be a boon for Tencent, which is looking to drive more sales of mini-programs on WeChat, its platform for lite versions of popular apps like Didi. Tencent generated 1.5 trillion yuan ($207 billion) in gross merchandise value from its mini programs in the September quarter last year.
Currently, users can download and use WeChat on Huawei devices, but the two companies do not have a formal agreement that obliges Tencent to provide regular updates to the app. The deal, which won’t create a noticeable change for phone owners, also requires Huawei to continue to host and support WeChat.
Negotiations are ongoing and the two sides may still be unable to reach an agreement, the people said. Huawei switched to its in-house Harmony operating system after US sanctions prevented it from working with Android owner Google.
Reaching a deal is particularly crucial for Huawei because the company is moving to a new version of Harmony that could lose access to WeChat if Tencent doesn’t continue to support the app. The agreement helps ensure that WeChat will be ready when Huawei makes its transition.
Huawei has also reached out to ByteDance Ltd.’s Douyin in an attempt to discuss revenue sharing, but the Beijing-based social media company has not expressed any interest in starting talks, one of the people said.
Huawei, Tencent and ByteDance did not respond to requests for comment.
Huawei’s deal with Tencent came out of a broader effort to start monetizing its smartphone platform, which has overtaken Apple’s iOS in terms of market share in China. Apple also doesn’t take a cut of WeChat transactions, but it does take a 30% commission on purchases of WeChat Beans, a virtual currency that users can spend on various in-app features like tipping a live streamer, agreement with people with knowledge of the matter. Apple did not respond to requests for comment.
–With assistance from Zheping Huang, Jessica Sui and Vlad Savov.
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