Telefonica to Strengthen Alliance With China Unicom

SANTANDER, Spain -(Dow Jones)- Telefonica is very confident it will be able to strengthen its alliance with China Unicom following the restructuring of China's state controlled telecommunications industry, Telefonica's Chief Operating Officer Julio Linares told reporters late Monday.

"The potential is brutal, we think the alliance in China is only going to grow," Linares said.

China Unicom is due to acquire China Netcom Group Corp. (Hong Kong) Ltd. this year in an all-share transaction.

Telefonica has a 5% stake in China Netcom, but market sources say it has gained approval from the Chinese government to increase the stake to around 7%, even after its stake is diluted following the takeover.

The same market sources say Telefonica is likely to raise its stake eventually to 10% in China Unicom.

Telefonica is Spain's largest telecommunications company by market value and subscribers.

-By Jason Sinclair, Dow Jones Newswires; +34 91 395 81 27; jason.sinclair@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 2nd September 2008