Telefónica seat for China Unicom

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China Unicom, the country’s second-largest telecoms operator, will win a seat on the board of Telefónica, the big Spanish group, in the latest sign of China’s eagerness to invest in European and emerging market businesses.

In a regulatory filing in Madrid on Sunday, the two groups announced a deepening of their existing strategic co-operation agreement through a further mutual purchase of each other’s shares for $500m each.

The share purchases will take Telefónica’s stake in China Unicom to 9.7 per cent and China’s Unicom’s holding in the Spanish group to 1.37 per cent. Telefónica will propose the appointment of a China Unicom representative to its board at the next shareholders’ meeting.

Chinese corporations have recently shown strong interest in Spanish companies with strong ties to Latin America, where China is anxious to do more business and where Telefónica is particularly strong.

Sinopec, the Chinese oil and gas group, has paid $7.1bn for a 40 per cent stake in the Brazilian subsidiary of Repsol, the Spanish energy company, and the two agreed to extend their partnership to new areas during a visit to Europe this month by Li Keqiang, the Chinese deputy premier and likely future premier.

Spanish companies, meanwhile, have been latecomers to Asia but several – including Telefónica and BBVA, the second-biggest listed bank – have made substantial China investments. César Alierta, Telefónica chairman, has previously said he wants his group to hold a tenth of China Unicom, which was forged from the merger of China Netcom and Unicom two years ago.

Telefónica’s original stake in Netcom became a smaller share of the enlarged Chinese group, although the holding was raised from 5.4 per cent to 8 per cent by the first stage of their strategic alliance in 2009.

“With a joint client base of 590m, around 10 per cent of the global population, this step in our strategic alliance strengthens our leadership position,” Mr Alierta said of the latest deal.

China Unicom became the first mainland Chinese group with a stake in a European telecoms operator when the two companies arranged an earlier round of mutual share-buying worth $1bn apiece in September 2009.

Telefónica and China Unicom already seek to co-operate on equipment purchasing, mobile telephony platforms and services to multinationals, and the plan is to do more to compete against Europe’s former national telecoms monopolies and other rivals.

China Unicom will buy 21.83m Telefónica treasury shares at €17.16 per share, the average price over the 30 days to January 14. Telefónica will buy China Unicom shares in the market over the coming nine months.

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