China Unicom and Telefonica in $1-billion share swap

China's second-largest mobile operator, China Unicom (Hong Kong) Ltd. and one of the world's leading mobile service providers, Spain's Telefonica SA, entered into a strategic alliance yesterday by each company investing the equivalent of $1 billion in the shares of the other party.

The agreements were signed in Beijing by the chairmen, Chang Xiaobing of China Unicom and Cesar Alierta of Telefonica, marking a major step forward in the cooperation between the two communication giants.

Under the deal, both the companies would cooperate in areas such as acquisition of infrastructure and equipment, development of wireless service platforms, services to multinational enterprises, roaming, R&D etc.

On completion of the transaction, Telefonica's holding in China Unicom will increase to approximately 8 per cent from the present 5.4 per cent, while China Unicom will hold about 0.9 per cent stake in its Spanish counterpart.

The share prices for the subscription will be based on 30-day average closing prices of China Unicorm shares on Hong Kong Stock Exchange and Telefonica shares on the Madrid Stock Exchange. 

The deal works out to approximately 693.9 million new China Unicom shares at HK$11.17 each to be acquired by Telefonica, and 40.7 million new Telefonica shares at €17.24 per share to be bought by China Unicom.