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China Unicom, Telefónica Strengthen Ties

Carriers invest in each other as they strengthen their alliance with plans to co-source technology and jointly develop service platforms

September 6, 2009

2 Min Read
China Unicom, Telefónica Strengthen Ties

China Unicom Ltd. (NYSE: CHU) and Telefónica SA (NYSE: TEF) have strengthened their existing relationship with plans to invest $1 billion in each others' equity and work closely together on a number of technology and service initiatives.

The two operators are already joined at the hip as the Spanish giant holds a 5.38 percent stake in the Chinese carrier as a result of its long-standing investments in China Netcom, which merged with Unicom's GSM mobile operations as part of last year's telecom sector upheaval. (See Telefónica Ups China Netcom Stake, China Begins $70B Carrier Revamp, and Telefónica Boosts Chinese Ties.)

Now Telefónica is to increase its stake in China Unicom to 8 percent, while the Chinese carrier will take a 0.88 percent stake in the Spanish firm. The partners say they have a combined customer base of 550 million subscribers, equivalent to about 10 percent of the world's population.

In addition to investing in each others' shares, the two operators say they plan to "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."

What's not clear, though, is who will be making the tea.

Certainly Unicom, which is in the early stages of rolling out its WCDMA network, will be able to benefit from Telefónica's extensive 3G experience, and learn a thing or two from its Spanish partner about the impact of introducing the iPhone to its customer base: Telefónica's Telefónica UK Ltd. is still the exclusive iPhone carrier partner in Britain. (See iPhone Heads to China, Unicom Enters Third Phase, and O2 Under Fire for iPhone Pricing.)

The two carriers will also be able to work together on how they might migrate from WCDMA to Long Term Evolution (LTE).

News of the closer relationship between the two operators will be music to the ears of Huawei Technologies Co. Ltd. , which is a strategic technology supplier to both carriers. (See Unicom Does 3G With Huawei, Huawei Wins Chinese 40G Deal, Huawei's SDP Coup, Telefónica Deploys Huawei DWDM, and Huawei Opens in Spain.)

— Ray Le Maistre, International News Editor, Light Reading

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