Obviously the reduction in this particular case is miniscule, and most people would say that Telefonica still holds 5 per cent of Unicom. But it's interesting to note that this move officially pushes Telefonica's stake below the 5 per cent level, which could be a some kind of threshold necessary for a next step that could see a total disposal of the stake.
Such a sale wouldn't be a huge surprise, since media have been speculating about it for a while. One report earlier this year said Telefonica was actually pursuing a sale. Another one last month said Telefonica was in need of cash to pay down its big debt, and that a sale of its Unicom stake, then valued at €1.3 billion euros, would be one of the easiest options.
It's not difficult to see why such a sale would be easy, as there's probably little or no actual relationship between the two companies beyond their equity relationship. Telefonica was full of hope for the partnership when the two sides strengthened an existing tie-up three years ago as part of the Spanish telco's hopes to eventually do business in China. But nothing ever happened in the partnership, as Unicom became embroiled in its non-stop management reshuffles and Telefonica faced its own debt explosion amid the European debt crisis.
From a broader perspective, this development would be interesting since it would leave China's three major telcos without a major foreign investor for the first time in more than a decade. China Mobile counted Vodafone (London: VOD) as one of its major stakeholders for a decade until the European giant finally sold its stake in 2010. Unicom has counted Telefonica and Korea's SK Telecom (Seoul: 017670) as major stakeholders over the years, while China Telecom has never had a major foreign partner.
Vodafone and now Telefonica's dumping of their China stakes both stem from the same reason, namely that neither company could derive any advantages from the partnership in entering China. Accordingly, I wouldn't expect to see any new similar tie-ups for at least the next year or two, though it's possible we could see something after that as China prepares to open up its telecoms market to virtual network operators (VNOs).
Bottom line: Telefonica could soon sell its remaining stake in China Unicom, ending an unsuccessful relationship that benefited neither side.
To read more commentaries from Doug Young, visit youngchinabiz.com