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September 7, 2009

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Telcos' strategic tie-up gets clear signal

SPAIN'S Telefonica yesterday said it had reached a deal with China Unicom whereby each would buy US$1 billion worth of each other's shares as part of a strategic alliance.

The Spanish telecoms company said in a regulatory statement that its stake in China Unicom would rise to about 8.06 percent, while the Chinese telco would hold between 0.885 and 0.892 percent of Telefonica.

Under the terms of the deal, Telefonica will buy 693,912,264 new shares in China Unicom at HK$11.17 (US$1.44) each.

China Unicom has agreed to buy 40,730,735 of Telefonica shares at 17.24 euros (US$24.65) each. Telefonica closed last Friday at 17.38 euros, up 1.02 percent.

Telefonica said each firm would either pay for the new shares issued by the other in cash, or Telefonica would pay for new shares in China Unicom with shares from its treasury stock.

The two companies have agreed not to issue, offer or sell a significant number of shares to any of their leading competitors, or to make significant investments in key rivals.

A Telefonica spokesman declined to comment on an unsourced report in Britain's Sunday Times that the Spanish giant and Vodafone had offered to buy T-Mobile UK for some 3.5 billion pounds (US$5.72 billion).

Telefonica owns British mobile operator O2.

T-Mobile UK is being offered for sale by owner Deutsche Telekom.



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