Telefonica and China Unicom Announce New Agreements

Telefonica and China Unicom announced on Sunday a strategic alliance aimed at the cooperation on different business areas. According to the duo, the terms of the agreement will allow them to jointly acquire infrastructure and equipment, develop wireless service platforms, provide services to multinational enterprises, as well as roaming and R&D, and to share practices and technical, operational and management expertise.

At the same time, the new deal between Telefonica and China Unicom is also targeted at enabling them to work together on initiatives in the network and technology development areas, and to come up with an exchange program for their managers. In addition, the two also announced entering into a subscription agreement according to which they will invest “the equivalent of US$1 billion in the other party through the acquisition of each party’s shares.”

“The share price for the subscription is the arithmetic average of the closing prices of each party’s shares on the Hong Kong Stock Exchange and the Madrid Stock Exchange respectively for the 30 consecutive trading days ending on 28 August 2009,” is what the agreement states. Thus, China Unicom is expected to own 0.88 percent share in Telefonica after the transaction is closed, while Telefonica will increase its stake in China Unicom from 5.38 percent to around 8 percent. The deal has been inked by the two companies' chairmen, Cesar Alierta and Chang Xiaobing.

“We are pleased to see that the strategic partnership between China Unicom and Telefonica has been further deepened on the current basis. Both of the companies are major full spectrum services carriers in their respective market, and both have third-generation mobile communications business under WCDMA standard. We are looking forward to enhancing the partnership and achieving a win-win situation for both parties. We believe that the partnership will help improve our capacities to provide extensive telecommunication and information application services, and maximize shareholders’ return,” stated Chang Xiaobing, Chairman of China Unicom.