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Google receives China’s approval for Motorola Mobility acquisition

By Liang Fei (Global Times)

08:10, May 21, 2012

China's Ministry of Commerce approved Google's $12.5 billion purchase of Motorola Mobility Holdings over the weekend on condition that Google's Android smartphone operating system will remain free and open to all handset makers over the next five years.

"Given Google's dominant position in the smartphone operating system sector, it might treat Motorola favorably after the acquisition, such as provide the new operating system first to Motorola… which will hurt competition in the market and put other handset makers in a disadvantaged position," said the ministry on Saturday.

By attaching strings to the approval, "the Chinese government aims to provide support to domestic smartphone producers since most smartphones produced in China are powered by the Android system," Li Yi, secretary-general of the China Mobile Internet Industry Alliance, told the Global Times yesterday.

Motorola spokeswoman Jennifer Weyrauch-Erickson said that they expect to close the deal early this week, according to a Reuters report Saturday.

Google announced the acquisition of Motorola in August, a deal expected to bring Google some 17,000 patents to protect Android handsets from legal disputes with rivals such as Apple Inc.

The deal got approvals from the European and US regulators in February. China's approval was the last regulatory hurdle for the world's top Internet search engine to develop its own line of smartphones.

According to Chinese anti-monopoly law, if a foreign company's acquisition could hurt competition in the Chinese market, Chinese authorities' approval will be needed in order to complete the deal.

Google's Android system had a 73.99 percent share in the Chinese smartphone market by the end of 2011, followed by Nokia's Symbian system, which had a 12.53 percent share and Apple's iOS with 10.67 percent share, the ministry said.

Li further noted that it is very likely that Google's Android system will no longer be free after five years now that the company has its owns smartphone products and it is also likely to develop Android into a system that is exclusive to its own handsets.

"Profits of Chinese handset makers will be further squeezed if the Android system is no longer free; after all most domestic handset producers focus on mid- and low-end handsets that are priced around 1,000 yuan ($158.03)," said Li.

Shen Zheyi, research director of mobile devices and consumer services at research firm Gartner, told the Global Times that it is possible that Google will give priority to Motorola after the acquisition.

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