Alliance of Tencent, JD could be a giant slayer

China's Internet giant Tencent Holdings Ltd is buying a stake in the country's second-largest online retailer in order to boost its competitive advantage in mobile Internet against its rival Alibaba Group Holding Ltd, the country's dominant player in e-commerce.

Shenzhen-based Tencent said on Monday it is injecting about $215 million in cash and its self-run e-commerce units into JD.com Inc for a 15 percent pre-IPO stake in the online retailer.

The deal, which comes ahead of JD's listing in the United States for $1.5 billion, is the latest in the rapidly growing Internet sector in China

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Under the strategic partnership inked by the two Internet companies, Beijing-based JD will gain access to tap into Tencent's significant mobile and Internet user base.

For its part, Tencent, whose dominating mobile messaging app WeChat has more than 600 million accounts, is expected to use JD's e-commerce services to turn WeChat into a super gateway to gain subscribers in the era of mobile Internet, said analysts.

"Our strategic partnership with JD will not only extend our presence in the fast-growing physical goods e-commerce market, but will also allow us to better develop our enabling services such as payment, public accounts and performance-based advertising network," Martin Lau, president of Tencent, said in a statement on Monday.

According to the arrangement, Lau will join JD as the company's board of directors. Tencent will subscribe at an IPO price for an additional 5 percent of JD on a post-IPO basis.

The competitive environment in China, where 500 million people have access to the Internet through mobile devices, has sparked a buying spree among homegrown Web titans. Citi Research has forecast that the big three - Baidu Inc, Tencent and Alibaba - will drive Internet-related deals to a record this year.

Compared with Tencent's previous two strategic investments - one in taxi-booking application Didi Dache, the other in restaurant-rating and group-buying service provider Dianping - the company's stake in JD is in a different class, one that could completely change the makeup of not only e-commerce but China's entire mobile Internet sector.

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