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Telefonica Looking to Increase Chinese Investment

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Telefonica has not ruled out increasing its investment in China Netcom Group in order to boost its holding in the future China Unicom network operator. Spain's Telefonica currently owns 5 percent of China Netcom Group, which has been ordered by the government to merge with China Unicom. The agreement would dilute Telefonica's stake in the enlarged group so the company plans to increase its investment to maintain a 10 percent holding in the group, chairman Cesar Alierta told the Financial Times.

His comments were confirmed by spokesman Miguel Angel Garzon.

Telefonica first acquired a stake in Netcom in 2005, when it bought 2.99 per cent of the company and increased this to 5 percent later. It announced plans to buy a further 2.2 percent of the company earlier this year and is waiting for regulatory approval. The total investment tops USD1 billion so far. If the company does not increase its investment in the merged group, then its holding will fall to around two percent.

South Korea's SK Telecom owns a 6.61% stake in China Unicom.

Back in 2005, Telefonica signed an agreement that would allow it to raise its stake in China Netcom to 9.9% - but has not exercised this in full yet.

China Unicom is selling it's CDMA network and subscriber base to China Telecom for USD15.9 billion - then will acquire China Netcom Group for US$56.3 billion in a share swap deal. Under the arrangement, China Netcom will be delisted and will become a wholly owned unit of China Unicom.

Vodafone owns 3.3% of rival operator, China Mobile.

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