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Telefonica Seeks to Become Key Holder in China Unicom

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MADRID (Dow Jones) Telecommunications giant Telefonica said Thursday it's seeking to become the leading private shareholder of the new company resulting from the merger of China Unicom and China Netcom Group Corp. (Hong Kong).

Telefonica said in a filing with Spanish regulators that it plans to own 5.5% of the new, merged company following the restructuring of China's state-controlled telecommunications industry. It estimates it will invest up to EUR802 million to increase its stake.

The acquisition represents a step forward in Telefonica's effort to position in China's coveted telecommunications market after expanding aggressively in Latin America and Europe.

Telefonica, Spain's largest telecommunications company by market value and subscribers, currently owns about 5% of China Netcom and is soon expected to get clearance for the ownership of another 2.2%.

China Unicom is due to acquire China Netcom Group in an all-share transaction.

Under terms of the deal agreed upon with New York-based asset management firm AllianceBernstein L.P., Telefonica will acquire up to 5.74% of China Netcom Group in two tranches.

In the first tranche, Telefonica will acquire 2.71% of China Netcom Group for about EUR368 million. It will then buy China Unicom shares after the two companies merge, representing 3.03% of China Netcom Group, for a price that is expected to range from EUR392 million to EUR434 million.

At 0800 GMT, Telefonica shares were up 0.2%, or EUR0.03, to EUR17.35; while Spain's key IBEX-35 index was 0.4% lower. At current values, Telefonica has a market capitalization of EUR81.63 billion.

-By Santiago Perez, Dow Jones Newswires; 34 91 395 8119; santiago.perez@dowjones.com

(END) Dow Jones Newswires

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