An Unusual Deal Keeps TikTok On US Phones

Walmart and Oracle will own 20% of the new company which could also have one foot in Texas.

By Michael Marks & Shelly BrisbinSeptember 21, 2020 6:46 am, ,

On Saturday, the Trump administration approved a deal that will keep TikTok available in the United States. Late last week, the Commerce Department had announced that the TikTok app, along with another Chinese-based social app, WeChat, would have to be removed from mobile app stores on Sunday. 

The new deal gives Walmart and database giant Oracle a 20% share in a new firm, TikTok Global. And there’s a potential Texas connection – one the Trump administration insisted on that’s intended to support an education initiative favored by the administration. Additionally, TikTok has a number of employees in Austin, with plans to expand in the coming year. 

Kate Cox is a tech policy reporter for Ars Technica. She told Texas Standard that the administration argues TikTok has access to large amounts of data stored on the mobile phones of U.S. users, and that that presents a national security risk because TikTok is run from China. It also argues that giving U.S. companies some control over the service reduces that risk. 

“This is a kind of bonkers deal, to be honest,” Cox said. “Oracle and Walmart are acquiring 20% of a new company [that] ByteDance, TikTok’s parent company, is spinning off.”

ByteDance retains the rest of the company, which is already partially owned by U.S. investors. 

“The reasoning goes that TikTok Global will be 53% U.S.-owned, and 4 out of 5 seats on its board will be reserved for people in the U.S., so that meets the terms of the executive order the president issued in August that would ban TikTok if it did not divest to a U.S. seller.”

President Donald Trump has previously said that a TikTok deal should include a $5 billion payment to the U.S. Treasury. On Saturday, he said the deal included $5 billion for an educational fund that could be based in Texas. In a statement, Walmart and Oracle said the fund “would develop and deliver an AI-driven online video curriculum to teach children all over the country.” The statement did not mention the amount of the fund, or where its work would be based.

Texas Gov. Greg Abbott tweeted about the Texas connection on Saturday, suggesting the state would make a good headquarters for the venture.

Cox said the TikTok deal is extremely unusual, and doesn’t do what Trump has advocated – turning TikTok over to Americans.

“It does give Oracle a very, very big cloud services customer, and that, in theory, should keep the data on U.S. servers,” Cox said. “Although ByteDance has always said that U.S. customer data was not going to China.”

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