China Unicom, despite initially closing ranks with their rival mobile operators against Tencent, has entered into a partnership agreement with Tencents wildly popular Weixin messaging service. Unicoms partnership with Tencent is taking the form of a customized SIM card that has been initially launched in Guangdong province. The SIM card is called Weixin Wo Ka ( Ka means card in Chinese pronunciation) emphasizing directly the co-branding by the two.

There are fairly straightforward considerations for Unicoms decision. One, Unicoms current service offerings pale in comparison to Weixin, both in terms of user experience and features. It would be prohibitively expensive to try to match Weixin in this regard. Second, unlike China Mobile, Unicom is much smaller and does not have the necessary scale in terms of users for its own service offerings to go head to head in competition with Weixin. Third, despite its smaller overall market share relative to China Mobile, Unicom has the lead in terms of 3G users and momentum. A partnership with a popular service like Weixin will only serve to boost their appeal relative to their much larger rival.

The success of Unicoms partnership with Weixin is too early to judge though early reports of heavy pre-orders are a positive sign that Weixins popularity may rub off on Unicom. The bigger story here is that this partnership will fundamentally disrupt the status quo in Chinas telecom markets where the mobile operators have typically acted in isolation and have strongly defended their competitive turf. Ovum expects many more partnerships in the coming months as both operators and OTT players in China embrace a more collaborative model.

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