Telefonica to enlarge holding in Netcom before industry shuffle

Telefonica, the second-largest telephone operator in Europe, will pay up to Euro802 million (HK$9.09 billion) to maintain its stake in China Netcom Group Corp, a mainland fixed-line operator that is merging with mobile operator China Unicom.

Telefonica, which owns about 5 per cent of Netcom, had reached an agreement with asset management firm AllianceBernstein to acquire an additional 5.74 per cent stake in Netcom, the company said in a statement filed with the Spanish stock exchange.

The acquisition will be in two tranches. Telefonica will immediately pay Euro368 million for a 2.71 per cent stake in Netcom.

It will acquire the remaining 3.03 per cent stake, valued at between Euro392 million and Euro434 million, subject to the completion of the merger between the two mainland telecommunications carriers.

The two moves will allow Telefonica to boost its stake in Netcom to as much as 12.93 per cent, although it will be diluted to about 5.5 per cent following the completion of the merger. Telefonica bought a stake of 2.22 per cent in January but the deal is still waiting for approval.

Unicom said in June it intended to pay up to HK$182.7 billion to buy out Netcom in a cash and share deal.

Unicom will swap one Netcom share for every 1.508 of its own shares, resulting in 10.1 billion new Unicom shares being issued.