Spain telecom giant Telefónica announced it has agreed to sell almost half its stake in China Unicom (4.56%) for about $1.41 billion (€1.13 billion) to the Chinese telecom’s unlisted parent company. It is part of Telefónica’s efforts to cut debt. China Unicom’s shares (CHU HK) were trading up this morning.
After the completion of the transaction, Telefónica said it will still would own 5.01% of China Unicom, and remain the second largest shareholder in the company. The deal, which is subject to regulatory clearance, is expected to close by the end of July.
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Telefónica said in a June 10 regulatory filing that it would sell more than 1.07 billion shares to China United Network Communications Group. Telefónica said it remains committed to the market, while its chairman, César Alierta, will retain his position as a China Unicom director.
In a statement, China Unicom noted the increase in ownership by its parent company demonstrates its confidence in future development.
The move comes after Telefónica’s announcement that it was planning an initial public offering of its German O2 unit to raise cash to pay-down debt and protect the company against América Móvil’s efforts to expand its presence in Europe. It would also help Telefónica’s finances during the current “Eurozone” crisis, that is hitting Spain particularly hard.
The company has also said that changes to its Latin American units could be next, as the telecom giant is analyzing the potential listing alternatives for those businesses.
