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Microsoft reveals talks to buy TikTok US, Canada, Australia, and New Zealand

Lianna Brinded
·Head of Yahoo Finance UK
·7-min read
In this photo illustration a TikTok logo is seen displayed on a smartphone with a Chinese flag on the background.  Photo: Getty
Microsoft aims to complete these discussions no later than 15 September this year. Photo: Getty

Microsoft (MSFT) confirmed in a statement that it is not only in talks to buy US operations for the video social media platform TikTok, but also in Canada, Australia, and New Zealand.

The US tech giant said in a lengthy blog post on its site that it is exploring a “preliminary proposal” to purchase the TikTok service in those countries with the platform’s owner ByteDance, which “would result in Microsoft owning and operating TikTok in these markets.” It added that Microsoft “may invite other American investors to participate on a minority basis in this purchase.”

It added that it aims to complete these discussions no later than 15 September this year.

The tight deadline comes after a report that US president Donald Trump only agreed to allow Microsoft to negotiate the acquisition if it could secure a deal in 45 days.

“This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries,” it added.

READ MORE: TikTok owner Bytedance's AI research head 'leaving company' amid US privacy spat

Representatives at TikTok did not immediately comment on the statement when Yahoo Finance UK reached out.

Chinese tech firm ByteDance, whose last valuation of $78bn (£61bn) makes it the world's most valuable start-up, is behind the app that is dominating the lives of millennials and generation Z. It only launched in September 2016 but, outside China, it has already amassed 300 million active users and 1.4 billion total installs to date.

TikTok videos use either user generated music or commentary, sound from shows, movies, or games, or actual songs or mash-ups by artists, which are called “sounds.”

Users can record videos themselves and either attach their own sound recordings or select a “sound” that is available within the app. Special effects, templates, and video timers are also available.

The popularity has seen it reshape the music industry and has created overnight celebrities/influencers on the app.

Last week, US president Donald Trump told reporters that he intended to ban the app from the US due to security concerns. In December 2019, the Pentagon had already issued a warning that military personnel should delete TikTok from all devices due to "potential security risks associated with its use,” and it was banned from devices for US Navy, AirForce, and Department of Homeland Security personnel.

Previously, Trump had talked down proposals for TikTok selling its US part of the business. However, in a change of tact, Trump seems to back a Microsoft buyout.

READ MORE: TikTok to leave Hong Kong amid security law fears

Meanwhile, TikTok responded to the US ban in a statement, saying:

“These are the facts: 100 million Americans come to TikTok for entertainment and connection, especially during the pandemic. We've hired nearly 1,000 people to our US team this year alone, and are proud to be hiring another 10,000 employees into great paying jobs across the US.

"Our $1bn creator fund supports US creators who are building livelihoods from our platform. TikTok US user data is stored in the US, with strict controls on employee access. TikTok's biggest investors come from the US.

"We are committed to protecting our users' privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform."

Vanessa Pappas, general manager of TikTok North America said in a video statement: “We’re not planning on going anywhere.”

In July, TikTok’s head of public policy for Europe Theo Bertram told BBC Radio 4 there was “zero truth” to allegations the Chinese state had access to users’ data.

TikTok under pressure from governments around the world

A boy wearing a face mask with the TikTok logo uses a mobile phone outside the downed shutters of a shop in Mumbai, India on July 29, 2020. Photo: Himanshu Bhatt/NurPhoto/Getty
A boy wearing a face mask with the TikTok logo uses a mobile phone outside the downed shutters of a shop in Mumbai, India. Photo: Himanshu Bhatt/NurPhoto/Getty

Over the last few months, the app has come under scrutiny from governments around the world over its security and potential ties with the Chinese government.

India: TikTok was already bigger than Facebook-owned (FB) Instagram in areas such as India, where it had 120 million users. However, last month, India banned the app and is banning an additional 47 apps, all clones or variations of 59 other apps India blocked in June. An official at India's Ministry of Electronics and Information Technology said this was based on national security grounds.

Japan: Over the last week, Japan joined the chorus of government seeking to restrict or ban TikTok. According to reports, lawyers shared the same concern as officials in the US and India that their domestic user data would end up in the hands of the Chinese government. Politicians are allegedly aiming to submit the proposal to restrict or ban the app to the Japanese government as early as September.

Australia: In the country where more than 1.5 million Australians have downloaded the app, prime minister Scott Morrison declared the federal government was looking "very closely" at TikTok and is “conducting two complementary investigations into the app.”

Hong Kong: TikTok actually pulled out of China’s Special Administrative Region after China said it would impose a new security law on the region. A spokesperson said: "In light of recent events, we've decided to stop operations of the TikTok app in Hong Kong.”

While government’s around the world are placing greater scrutiny and pressure on TikTok, UK prime minister Boris Johnson has allegedly given the green light for the social media platform to set up its global headquarters in London, according to The Sun. This is despite previously pulling back from talks for its non-China business in the UK, threatening the creation of 3,000 jobs.

TikTok had not immediately responded to Yahoo Finance UK’s request for comment on non-US operations and what impact buyout talks may have on London as its HQ.

Here is the full statement from Microsoft via its blog:

“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 fully appreciates the importance of addressing the President’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.

“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. During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President.

“The discussions with ByteDance will build upon a notification made by Microsoft and ByteDance to the Committee on Foreign Investment in the United States (CFIUS). The two companies have provided notice of their intent to explore a preliminary proposal that would involve a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand and would result in Microsoft owning and operating TikTok in these markets. Microsoft may invite other American investors to participate on a minority basis in this purchase.

“This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.

“Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.

“Microsoft appreciates the U.S. Government’s and President Trump’s personal involvement as it continues to develop strong security protections for the country.

“These discussions are preliminary and there can be no assurance that a transaction which involves Microsoft will proceed. We do not intend to provide further updates until there is a definitive outcome to our discussions.”

READ MORE: TikTok's indisputable power over influencing music sales

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