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China Unicom and Telefonica reach deal
Published on: 2009-09-07
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HONG KONG -- China Unicom and Spain's Telefonica have reached a deal that further cements the alliance between the two telecom giants.

Each will buy $1 billion worth of the other's shares, according to an agreement signed in Beijing on Sunday. The Spanish firm's stake in Unicom will rise to 8%; and China's second-largest wireless operator will hold about 0.9% of Telefonica.

For both, the move is a strategic effort to stay competitive and gain market share even as the global downturn has necessitated cost-cutting and other cutbacks. One of China's three state-owned carriers, China Unicom competes with China Mobile and China Telecom. Unicom announced a three-year deal with Apple last month to become the first Chinese phone company to formally support the iPhone, whose debut in China is scheduled for Sept. 28.

It was a sign of the industry's hard times that Telefonica in March announced a deal with archrival Vodafone, in which they plan to share antennas, base station sites and power supplies in Europe. This was after Telefonica said it will cut capital expenditure by nearly 13% in 2009.

Under the latest agreement, Telefonica and China Unicom said they would cooperate when it comes to sharing infrastructure and equipment, performing research and development and providing roaming services and other options for multinational customers. Managers from both companies will also participate in an exchange program.

The deal, according to a statement, gives both companies access to a combined 550 million customers worldwide. Telefonica says it has 264 million subscribers, while China Unicom reports 141 million mobile subscribers and 108 million land-line subscribers.

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