MercoPress. South Atlantic News Agency

Spain-China Expand Alliance

Telefónica chairman Cesar Alierta

Spanish Telefónica and Chinese operator Unicom agreed on Sunday to expand their alliance, both investing a further U$ 500 million in the other. Under the agreement, China Unicom could get a seat on Telefónica.

Following the new investments, Telefónica will hold a 9.7% stake in its Chinese partner, while China Unicom will own 1.4% of the Spanish firm.

In 2009, the two partners agreed a tie-up and invested $1bn in each other.

Telefonica said it should complete its purchase of China Unicom shares within the next nine months.

The two parties said they would co-operate further in a number of key areas, including mobile services platforms, procurement and wider technologies.

“We are very pleased to further strengthen our relationship with China Unicom,” said Telefónica chairman Cesar Alierta.

“With a combined customer base of 590 million, approximately 10% of the world's population, this new step in our strategic alliance reinforces our leadership position.”

Telefónica said it would propose at its next shareholder meeting that a representative of China Unicom would join its board.

Mr Alierta already holds a seat on China Unicom's board.

China Unicom's chairman Chang Xiaobing said the “enhancement of the strategic alliance will promote the competitive advantages of both parties and maximise shareholders' returns”.

Telefónica is looking to expand internationally to enter higher-growth markets. And China, with its booming population and relatively low penetration of mobile phones compared with western, developed economies, is one of the fastest growing markets in the world.

The company is also looking to expand into Latin America - last year it agreed a deal to buy Portugal Telecom's stake in Brazil's Vivo, the country's largest mobile phone company.