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Telefonica Increases its Stake in China Unicom

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Spain's Telefonica and China's Unicom are to invest USD1 billion in each other and have signed an agreement to cooperate in various business areas. After the completion of the transaction, China Unicom's shareholding in Telefonica will be approximately 0.88% and Telefonica's shareholding in China Unicom will increase to approximately 8% from 5.38%.

These agreements were signed in Beijing by the operators' respective chairmen, CÚsar Alierta and Chang Xiaobing.

Telefonica already had a 5% stake in China Netcom, but that was heavily diluted by the government mandated merger with China Unicom earlier this year. Last year, unconfirmed reports suggested that Telefonica had gained informal approval to eventually raise its stake in the enlarged China Unicom to 10%.

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 last year. The total investment tops USD1 billion so far. If the company had not increased its investment in the merged group, then its holding would fall to around two percent.

After the signing of the two agreements, Telefonica Chairman CÚsar Alierta said that "we are delighted with this alliance, which will bolster both of our companies' leadership positions, giving us a combined global customer base of nearly 550 million. We are fully committed to the alliance and will exploit the synergies offered by this far-reaching cooperation to benefit our shareholders and customers alike, making us bigger and more diversified so we can continue to compete globally by offering convergent solutions and best practices".

Mr. Chang Xiaobing, Chairman of China Unicom, says that "we are pleased to see that the strategic partnership between China Unicom and Telefonica has been further deepened on the current basis. Both of the companies are major full spectrum services carriers in their respective market, and both have third-generation mobile communications business under WCDMA standard. We are looking forward to enhancing the partnership and achieving a win-win situation for both parties. We believe that the partnership will help improve our capacities to provide extensive telecommunication and information application services, and maximize shareholders' return".

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