Telefonica, China Unicom Get Closer

BEIJING and MADRID -- Telefónica (NYSE:TEF) (LSE:TDE) and China Unicom have entered into a strategic alliance agreement pursuant to which the parties agreed that they would cooperate in various business areas such as the joint acquisition of infrastructure and equipment for customers, the joint development of wireless service platforms, the joint provision of services to multinational enterprises, roaming, R&D, the sharing of best practices and technical, operational and management expertise, the joint development of a set of strategic initiatives within the framework of network and technology development, as well as establish an exchange program for their managers.

In addition, both parties have also entered into a subscription agreement pursuant to which China Unicom and Telefónica agreed to invest the equivalent of US$1 billion in the other party through the acquisition of each party’s shares. Pursuant to the subscription agreement, the share price for the subscription is the arithmetic average of the closing prices of each party’s shares on the Hong Kong Stock Exchange and the Madrid Stock Exchange respectively for the 30 consecutive trading days ending on 28 August 2009. After the completion of the transaction, China Unicom’s shareholding in Telefónica will be approximately 0.88% and Telefónica’s shareholding in China Unicom will increase to approximately 8% from 5.38%.

These agreements were signed in Beijing by the operators’ respective chairmen, César Alierta and Chang Xiaobing, and mark a major step forward in the cooperation agreements carried out between the carriers to date.

After the signing of the two agreements, Telefónica Chairman César Alierta said that “we are delighted with this alliance, which will bolster both of our companies’ leadership positions, giving us a combined global customer base of nearly 550 million. We are fully committed to the alliance and will exploit the synergies offered by this far-reaching cooperation to benefit our shareholders and customers alike, making us bigger and more diversified so we can continue to compete globally by offering convergent solutions and best practices”.

Telefónica SA (NYSE: TEF)

China Unicom Ltd. (NYSE: CHU)