President Donald Trump said Saturday he had approved a deal allowing Silicon Valley giant Oracle to become the data partner for TikTok to avert a shutdown of the massively popular Chinese-owned video app that Washington has called a security risk.
The deal, announced by the companies, also includes Walmart as a commercial partner and would create a new US company named TikTok Global.
“I think it’s going to be a fantastic deal,” Trump said. “I have given the deal my blessing. If they get it done that’s great, if they don’t that’s okay too.”
Shortly after, TikTok — owned by China’s ByteDance — confirmed the agreement, which came with companies racing against a Sunday deadline set by Trump’s administration after which new downloads of the app would be banned.
Oracle could buy a 12.5 percent stake in TikTok before a future IPO, and Walmart a 7.5 percent stake.
According to a source close to the matter, ByteDance would keep the rest of the shares. But since the Chinese company is 40 percent owned by American investors, TikTok would eventually be majority American-owned.
“We are pleased that the proposal by TikTok, Oracle, and Walmart will resolve the security concerns of the US Administration and settle questions around TikTok’s future in the US,” a spokeswoman for TikTok told AFP.
ByteDance also confirmed the deal on social media, saying the three companies would reach an agreement that was “in line with US and Chinese law” as soon as possible.
If it comes to fruition, the deal could mark the deescalation of a technology battle between Washington and Beijing.
It could also allow Americans to continue using the wildly popular app: the US Department of Commerce announced it was postponing the ban on TikTok downloads until September 27, citing “recent positive developments.”
– Security concerns –
Trump has claimed for weeks that TikTok is collecting user data for Beijing, without ever providing evidence for his allegations.
In early August, he gave ByteDance until September 20 to hand over TikTok’s US operations to an American company.
And on Friday, the Trump administration ordered a ban on downloads of the video-sharing app, as well as Chinese-owned messaging platform WeChat.
TikTok’s brand of short, quirky phone videos has become a global phenomenon, especially among young people, with 100 million users in the United States alone.
Trump said the “security will be 100 percent” and that the companies would use separate cloud servers.
The deal will lead to the creation of a new company, headquartered in Texas, that will have “nothing to do with China” but will still be called TikTok, according to the president.
Oracle will be in charge of hosting all US user data and the security of the associated computer systems, while Walmart will supply its online sales, order management and payment services.
In a joint statement, Oracle and Walmart said TikTok Global would “pay more than 5 billion in new tax dollars to the US Treasury,” while they and the other companies involved in the deal would launch an initiative to develop online education.
Trump, who previously said the federal government deserved a cut of the deal for authorizing it, had initially announced the companies would make a “contribution” towards education.
– ‘Bullying’ –
Under Friday’s US order against the Chinese apps, Tencent-owned WeChat would lose functionality in the United States from Sunday.
Following the TikTok-Oracle-Walmart deal’s announcement, TikTok users will be banned from installing updates starting September 27.
In response, China’s Commerce Ministry on Saturday condemned what it called US “bullying,” saying it violated international trade norms and that there was no evidence of any security threat, shortly before launching a mechanism that would allow it to sanction foreign companies.
China’s long-expected “unreliable entities list” is seen as a weapon for Beijing to retaliate against the United States, which has used its own “entity list” to shut Chinese telecom giant Huawei out of the US market, in addition to the recent moves against TikTok and WeChat.
“While the US/China tensions continue across all aspects of the technology food chain, resolving this TikTok and ByteDance standoff and complex Rubik’s Cube political backdrop is a relief for tech investors with Oracle in the winners circle,” said Wedbush analyst Dan Ives.
According to the US Treasury, the TikTok deal still needs to be finalized by the involved companies and approved by a federal national security committee.
With Trump facing a tough reelection campaign, US officials have described the measures as essential to safeguard against potential Chinese espionage through the platforms.
But Trump critics have said that while TikTok’s security risks were unclear, the sweeping ban raises concerns about the government’s ability to regulate free expression.