BEIJING -- Telefónica and China Unicom have agreed to enhance their Strategic Alliance, and to deepen their cooperation in areas such as procurement, mobile service platforms, services to MNCs, wholesale carriers, roaming, technology, among others, where both companies have been cooperating since the signature of their Strategic Alliance Agreement.

Additionally, Telefónica and China Unicom have strengthened their Strategic Alliance with a new mutual investment pursuant to which the parties agreed to increase their respective stakes by acquiring the equivalent of US$500 million in the other party through the purchase of each party’s shares. China Unicom will raise its interest through the acquisition of 21,827,499 Telefónica shares at an agreed value of 17.16 Euros per share. The criteria employed in determining the share price was the arithmetic average of closing prices for the thirty consecutive trading days ending on 14 January 2011, consistent with the criteria applied at the first share exchange agreement entered into between Telefónica and China Unicom in 2009. In turn, Telefónica will buy from third parties the China Unicom shares to be completed within the next 9 months. Once completed, Telefónica will increase its interest in China Unicom to around 9.7%, assuming current share prices, and China Unicom will have a 1.37% stake in Telefónica.

Furthermore, the Board of Directors of Telefónica will propose at the next General Shareholders’ Meeting the appointment of a new member of the Board of Directors representing China Unicom.

The agreement signed today follows the one reached back in 2009, where the two companies invested US$1 billion in the other party's shares and entered into a Strategic Alliance Agreement.

Telefónica SA (NYSE: TEF)