UPDATE: Telefonica, China Unicom Strengthen Partnership
January 23 2011 - 7:50AM
Dow Jones News
MADRID (Dow Jones)-Spain's Telefonica SA (TEF) said Sunday that
it will widen its strategic partnership with China Unicom (Hong
Kong) Ltd. (CHU), with each company investing $500 million to
increase their cross shareholdings.
Telefonica said in a filing with regulators that it will raise
its stake in China Unicom to 9.7%, while the Chinese
telecommunications company will increase its ownership in the
Spanish company to 1.37%. Telefonica said last summer it intended
to increase its stake in China Unicom to around 10%, but hadn't
said when it would do so.
The Spanish telecoms giant said the strategic agreement and
investment plan is unprecedented in China´s coveted market, which
still has low penetration rates and high growth potential.
The expanded agreement also comes at a time at a time when
Telefonica's mature Spanish home market is suffering from the
lingering impact of a severe contraction and record
unemployment.
Spain's No. 1 telecommunications firm by market value has
expanded aggressively abroad, from fast-growing Latin American
states and promising economies such as China, to cutthroat, mature
European markets like the U.K.
The Spanish company currently has 277.7 million clients
worldwide, up from 68.2 million in 2000. China Unicom, meanwhile,
is the world's No. 4 telecoms firm by clients, with 310 million
customers. Their combined customer base equates to about 10% of the
world's population, Telefonica's Chairman Cesar Alierta said in a
statement.
"Every six months, the Chinese (telecommunications) market grows
at a rate that equals Spain's population," adding 9 million
customers on a monthly basis, Telefonica said. The Chinese telecoms
market is expected to have one billion users next year, it
added.
The Spanish company is the main foreign partner of China Unicom.
It took a minority stake through a strategic alliance with what
today is China Unicom in 2005. The two companies cooperate on
mobile phone service platforms, equipment purchase, corporate
telecommunications services and technology.
Under the new agreement, China Unicom will now have board
representation at Telefonica. Alierta already seats on China
Unicom's board and goes to China on a monthly basis.
To boost their cross shareholdings, Telefonica will sell to the
Chinese firm more than 21.8 million shares held in treasury at
EUR17.16 each, representing the average price of the past 30
trading days. The deal will boost China Unicom's total investment
in Telefonica to $1.5 billion.
Telefonica, in turn, will buy China Unicom shares through market
transactions over the next nine months.
Last September, by contrast, Vodafone Group PLC (VOD), the
world's biggest mobile operator, sold its stake in China Mobile
Ltd. (CHL) for GBP4.3 billion before tax and transaction costs, as
part of Chief Executive Vittorio Colao's strategy to shed minority
investments and return cash to shareholders.
Telefonica shares closed Friday in Madrid at EUR18.37, valuing
the company at EUR83.84 billion.
-By Santiago Perez, Dow Jones Newswires; (34) 618 528 681;
santiago.perez@dowjones.com
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