(Yicai) May 13 -- Tencent Holdings has secured approval from China’s antitrust watchdog to go ahead with its acquisition of Ximalaya, the country’s largest online audio platform, subject to certain conditions after an almost year-long regulatory review.

Tencent Music Entertainment, a subsidiary of the Chinese tech giant, can proceed to buy Ximalaya subject to five conditions to ensure fair market competition, as the deal could potentially eliminate or restrict competition in China’s online audio and music streaming market, the State Administration for Market Regulation said in a statement yesterday.

TME announced last June that it had signed a binding agreement to buy Ximalaya for USD1.3 billion in cash and new shares issued to all Ximalaya shareholders and founding investors equal to as much as 5.6 percent of TME’s total equity. Based on TME’s market capitalization at the time, the deal was worth about USD2.9 billion.

The conditions prevent Shenzhen-based TME from raising Ximalaya’s service prices, increasing its share of free content, entering into exclusive agreements with its copyright holders, bundling audio and music services for carmakers, and blocking creators from using rival platforms.

The acquisition will enable TME to quickly fill content gaps, while giving Ximalaya a reasonable outcome after failing for years to prove to the capital markets the full commercial promise of the “ear economy,” according to internet industry analyst Zhang Shule.

Valued at as much as USD4.3 billion in 2020, Ximalaya tried to go public four times between 2021 and 2024, first in New York and then in Hong Kong. It has also reportedly gone through many rounds of layoffs and management changes, leading to a sharp drop in its valuation. After years of losses, ‌Ximalaya made its first annual net profit of CNY3.7 billion (USD544.7 million) in 2023.

Tencent’s shares [HKG: 0700] rose 1.2 percent to close at HKD462.60 (USD59.08) each in Hong Kong today. In pre-market trading in New York, TME’s stock [NYSE: TME] was little changed at USD9.06 as of 5.18 a.m. local time, after falling 1.3 percent yesterday.

Ximalaya and Tencent’s audiobook platform, Lazy Audio, have overlapping user bases, Zhang noted. Key questions now are whether the two will continue as separate brands or be integrated, and if and how their membership systems will be connected and adjusted, he added.

Ximalaya had more than 300 million listeners for its audiobooks, podcasts, radio broadcasts, and music by the end of 2023, Frost & Sullivan said previously. It has a 35 percent to 40 percent share of China’s online audio market, followed by Qingting FM and Lazy Audio at around 30 percent, according to figures released by LeadLeo Research last November.

Editor: Futura Costaglione