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US-China tensions

Microsoft says talks on possible TikTok purchase to continue

Tech giant aims to complete negotiations in 'matter of weeks' as US ban looms

Microsoft says it is planning to complete talks to buy TikTok, the U.S. unit of Chinese technology company ByteDance as U.S. President Donald Trump weighs a ban of the popular video app over security concerns.   © Reuters

TOKYO/HONG KONG -- Microsoft is going ahead with efforts to acquire TikTok in the U.S after holding direct talks with U.S. President Donald Trump, who has threatened to ban the China-owned app over security concerns.

The CEO of TikTok's owner ByteDance also admitted in an internal memo on Monday that the company was being forced to sell its U.S. operation but was in talks to work out how it could continue to serve U.S. users.

The statements are the first public confirmations that Microsoft is seeking to acquire TikTok from ByteDance after weeks of escalating pressure on the app's U.S. operations from Washington.

Microsoft said its talks with ByteDance would end by the middle of next month, in effect giving the two companies around six weeks to reach a deal. The deal would see Microsoft buying the TikTok service in the U.S., Canada, Australia, and New Zealand, the U.S. tech group said, adding that it may invite other American investors to purchase minority stakes.

"Following a conversation between Microsoft CEO Satya Nadella and President Donald J. Trump, Microsoft is prepared to continue discussions to explore a purchase of TikTok in the United States," Microsoft said in a statement on Sunday.

"Microsoft will move quickly to pursue discussions with TikTok's parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020," it added.

TikTok has become hugely popular among users in the U.S but has been under intense scrutiny from the Trump administration, which is considering a ban over its contention that American data would be transferred to China.

The Committee on Foreign Investment in the U.S. (CFIUS), an interagency body including representatives from the Treasury and Commerce departments, has scrutinised ByteDance over its acquisition in 2017 of Musical.ly, which later became TikTok.

"TikTok cannot stay in the current format because it risks sending back information on 100 million Americans," Treasury Secretary Steven Mnuchin said on Sunday.

Zhang Yiming, the CEO of ByteDance, admitted that his efforts to collaborate with CFIUS over its probe of the Musical.ly deal did not generate a desirable outcome.

"Despite our emphasis as a privately-owned company and our willingness to provide more solutions to address [regulators] concern, CFIUS has still decided that ByteDance must sell TikTok's US operation, which we disagree with," Zhang told his team, according to an internal memo sent to employees and reviewed by the Nikkei on Monday.

"We will not give up exploring all the possibilities," Zhang said in the memo.

Without naming Microsoft, he also said that ByteDance is "in a preliminary discussion with a tech company on possible collaboration to figure out a way to ensure that TikTok could continue serving U.S. users."

The attempt by Microsoft and ByteDance to salvage a TikTok deal comes as the Trump administration weighs wider action against China-owned apps in the U.S. -- part of an escalating battle over technology between Washington and Beijing.

Secretary of State Mike Pompeo said that Trump would take action in the coming days on "a broad array of national security risks that are presented by software connected to the Chinese Communist Party."

Microsoft argued in its statement that having a U.S. owner would ease security risks over TikTok's popular short video app. "This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections," Microsoft said.

Microsoft said it would ensure that all the private data from TikTok's American users "is transferred to and remains in the United States".

Additional reporting by Yifan Yu in Palo Alto

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