Shares of China Unicom (Hong Kong) reached a two-year high in early trading before falling sharply a day after the mainland's second-largest telecommunications network operator expanded its strategic alliance with Spanish carrier Telefonica.
Unicom, which had agreed with Telefonica to buy an additional US$500 million stake in each other, yesterday saw its shares slip 0.65 per cent to close at HK$12.26.
The early initial burst of enthusiasm saw the Beijing-based company's shares rise up to 3.9 per cent to hit HK$12.82, the highest intraday level since September 8, 2008.
In a research note, analysts at Deutsche Bank said: 'We have not seen material forms of synergy emerge between foreign operators and their Chinese partners over the past several years.'
The analysts, who maintain a 'hold' rating on Unicom stock and a target price of HK$11.34, cited as examples British carrier Vodafone Group, which sold its 3.2 per cent stake in China Mobile for US$6.5 billion in September last year, and South Korea's SK Telecom, which sold back to Unicom its 3.8 per cent in the mainland carrier for about HK$10 billion in November 2009.
Unicom chairman Chang Xiaobing and Telefonica chairman Cesar Alierta, who signed the new agreement on Sunday, said co-operation would increase in areas such as equipment purchases, mobile service platforms, roaming, technology and service to multinational corporations and wholesale carriers. Their new deal followed one forged in September 2009, when the two sides agreed to invest the equivalent of US$1 billion in each other. The two operators have a combined customer base of 590 million worldwide.
