Not So Fast, Google: China Wants A Look At Your Motorola Deal First

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Google has overcome two big regulatory hurdles in getting its $12.5-billion acquisition of Motorola Mobility approved by both U.S. and European regulators. China has until March 20 to decide whether or not it will wave through the deal, too.

The country’s Anti-Monopoly Bureau is now reviewing the deal — a routine part of the procedure for companies that make more than 400 million yuan ($63 million) in China and 10 billion yuan ($1.6 billion) globally. (Google reported revenues of nearly $38 million for 2011.) Now some think that China might use the opportunity to get Google to bring back its search business to the Mainland from Hong Kong.

Google has had a thorny relationship with China, and in 2010 relocated the bulk of its operations — its search business — to Hong Kong after allegations of hacking by Chinese authorities.

But China also spells a huge opportunity for the company: Android devices are selling like hotcakes on the mainland — with Q3 figures from Analysys International putting Android’s smartphone OS share in the country at nearly 60 percent (effectively swapping places with Nokia’s Symbian, which was 23 percent).

However, Google is, at the moment, missing out on a lot of the benefits of that, with every OEM, carrier, internet portal and their mothers offering forked versions of the OS, complete with third-party app stores, and other services that disintermediate the company.

Its search business, as of Q3 2011, had dropped to around 17 percent of the market, with local companies like Baidu dominating the space.

The Bureau will decide by March 20 whether to put the deal through another stage of the review process. Google first filed for approval in September 2011.

And according to a report in Reuters, there could also be a twist: citing two analysts in the area, it notes that regulators could use the deal as “leverage over Google” for its move to Hong Kong, to begin a “dialogue” with authorities over how Google could return to doing business more fully in China.

However Google’s negotiations go, it seems unlikely China will seek to halt the deal altogether. Edward Yu of Analysys International, speaking to Reuters, said that if China does object, the deal will fall apart. But with China gearing up to replace its party leadership, he said: “I don’t think there will be anything extreme” on the cards in terms of decision-making.

There have been a lot of question marks over what, exactly, Google wants most in a Motorola acquisition. There is the question of patents, for sure — 17,000 already in existence and applications for a further 7,500. But even if Google has said it would run Motorola as a separate business unit, owning a handset maker could give the company a crack at making its own range of Android devices that it could sell in countries like China, creating a foothold for other money-making services.

Bargaining over growing its business in China may well fit into a wider Google strategy anyway, with reports (like this one from the WSJ) that the company is on a hiring run in the country again, picking up engineers, sales people and product managers, as well as launching new services this year.