Operator giants Telefonica and China Unicom yesterday announced plans to buy US$1 billion worth of stock in each other to deepen a strategic alliance. After the transactions, Telefonica’s stake in China Unicom will increase from 5.38 percent to approximately 8 percent (making the Spanish company the largest single investor in the Chinese operator), whilst China Unicom will take a 0.88 percent stake in Telefonica. The two companies also said they will jointly buy infrastructure and equipment for customers and develop mobile service platforms and services for multinational companies. The agreement extends to network roaming and the sharing of technical research.
The deal strengthens relations between the two operators, following completion of a “business cooperation framework agreement” earlier this year. Such a partnership stems from a 2005 deal when Telefonica acquired a 2.99 percent stake (later raised to 5.4 percent) in China Netcom, now merged with China Unicom. Combined, Telefonica and China Unicom have a global customer base of nearly 550 million. Both operators offer both fixed and mobile services, with the mobile networks based on GSM/WCDMA technology. Importantly, Reuters notes that this latest deal sees both operators agree not to issue, offer or sell a significant number of shares to any of their leading competitors, or to make significant investments in key rivals.