Spain’s Telefonica is to spend as much as €802 million (US$1.16 billion) to acquire a further 5.74 percent stake in China Netcom, significantly strengthening its presence in the world’s largest mobile market ahead of the country’s restructuring. The purchase – acquired from US-based asset management firm Alliance Bernstein – will be made in two tranches: an initial 2.71 percent for €368 million, and a further 3.03 percent costing between €392 million and €434 million to be paid following the completion of China Netcom’s merger with China Unicom. Once finalised, the deal will see Telefonica own a 5.50 percent stake in the enlarged Chinese operator, reportedly making it the single largest private investor. The Spanish group already owns 5 percent of China Netcom and is awaiting regulatory approval for a further 2.2 percent it acquired in January this year.

Analysts described the move as a major shift in focus for the group. “We believe Telefonica’s interest in Netcom is part of a broader strategic push by Spain to strengthen ties with China and diversify away from their traditional international focus on Latin America,” HSBC analyst Tucker Grinnan told Reuters. The merger between China Unicom and China Netcom is scheduled to finalise next month. Although officially being termed a ‘merger,’ China Netcom will be delisted and will become a wholly-owned unit of China Unicom. Under the terms of the restructuring, China Unicom will also sell its CDMA operations to China Telecom, which will become a new mobile operator. China Unicom has previously stated that it will invest up to RMB100 billion (US$14.6 billion) building its 3G WCDMA network over the next two years and is aiming to introduce 3G services in the third-quarter of 2009. Global operator Vodafone already owns a 3.2 percent stake in China Mobile, the country’s largest mobile operator. In a separate development, Dow Jones reports that Telefonica plans to launch 3G services in Argentina, Brazil, Chile, Colombia, Mexico and Peru in first-quarter 2009, citing comments made by the company’s head of Latin America, Jose Maria Alvarez-Pallete, at a conference this week.