Telefónica sells part of China Unicom stake to help cut debt

Telefónica has reached an agreement to sell half of its stake in China Unicom back to the company as the Spanish giant continues its attempts to cut mounting debt.

The sale of its China Unicom shares for approximately $1.4 billion will see Telefónica’s holding in China’s second largest mobile operator reduced to just 5%. As part of the agreement, Telefónica will be unable to sell any further shares to China Unicom in the next 12 months. 

Telefónica faces huge pressure to reduce its €57 billion net debt. The company has spent $85 billion on acquisitions since 2000, but last month its board announced that it would pursue an IPO along with “selective asset monetisations”, by speeding up the sale of non-core activities. It is said to be preparing a stock market listing of its German unit, which has an estimated value of €10 billion, and is also considering the sale of some of its assets in Latin America, estimated at €40 billion. 

Telefónica’s interest in the Chinese market dates back to June 2005 when the company purchased an approximately 2.9% share in China Netcom Group. China Unicom acquired China Netcom Group in 2008, and in 2011, Telefónica agreed to increase its stake in the company to 9.7% with the Chinese operator also increasing its stake in the Spanish company to 1.37%. 

Telefónica has said that it remains committed to its alliance with China Unicom and that it will explore new opportunities with the company in the future. The deal is expected to be completed by the end of July.