Firms to take on Tencent's WeChat by launching mobile chat app

China Telecom Corp Ltd, the nation's biggest fixed line network operator and third-largest mobile service provider, formed a joint venture with Chinese Internet company NetEase Inc on Monday to launch a mobile chatting tool called Yixin.

China Telecom formed a joint venture with NetEase Inc on August 19, 2013 in Beijing to launch a mobile chatting tool called Yixin. [Photo / CFP]

The move signifies the birth of the world's first joint venture set up by a telecommunications operator and an Internet company. Analysts pointed out that the convergence between telecom and Internet industry will become a trend, because both parties are trying vigorously to explore business opportunities in the mobile Internet sector.

China Telecom holds the major stake - 73 percent - in the joint venture that is called Zhejiang Yixin Technology Co, while NetEase has the remaining stake. The joint venture has a registered capital of 200 million yuan ($32.43 million) and is responsible for the development and operations of newly launched mobile messaging application Yixin.

Officials from both China Telecom and Nasdaq-listed NetEase did not avoid talking about Yixin's ambition to grab shares from the market's dominant player - Tencent Holdings Ltd's WeChat.

In addition to standard features such as push-to-talk voice messages and photo sharing, the biggest difference between Yixin and WeChat, is that the former is capable of sending free text and voice messages to any mobile phone users, whether the receivers have installed the Yixin app or not.

Yang Jie, general manager of China Telecom, said Yixin combines the resources of NetEase and China Telecom. "Therefore, Yixin has natural advantages over rivals in the first place and can offer differentiated services," Yang said.

William Ding, founder and chief executive officer of NetEase, said the domestic mobile instant-messaging market is far from saturated. "The market competition is not sufficient. Both users and the market need more choice," Ding said in a statement. The young generation, in particular, demand fashionable and personalized communications methods. That's the opportunity for Yixin, he added.

Tencent said in its earnings report last week that its WeChat messaging application had 236 million monthly active users - nearly triple the number from a year earlier. Miliao, another market player developed by smartphone company Xiaomi Corp in 2010, has more than 40 million registered users and a daily active user base of about 4 million.