Feeds

Telefonica steps back from China as debts mount

Reduces stake in China Unicom by half

Boost IT visibility and business value

Spanish network giant Telefonica revealed just how much financial trouble it may be in after it was forced to sell half of its shares in China Unicom back to China’s number two telco.

Telefonica will remain a major shareholder in the Chinese company with a 5.01 per cent stake, but is set to cash in on 4.56 per cent to the tune of around HK$11bn (£911m), according to a filing with the Hong Kong Stock Exchange on Sunday.

“The deal reflects [Telefonica's] ... decision to manage pro-actively its asset portfolio and will allow Telefonica to increase its financial flexibility," the firm said in a statement.

Telefonica remains committed to its partnership with China Unicom and won’t sell any further shares for at least 12 months, the filing said.

However, the future remains far from bright for O2’s parent company. Its Q1 earnings fell 54 per cent year-on-year to €748m (£607m), while revenue stayed virtually the same at €15.5bn (£12.6bn).

As if that wasn’t bad enough, debt ratings agency Standard & Poor's reduced its rankings for the firm last month, from BBB+ to BBB, just two steps above “junk bond”.

The move to reduce its China Unicom stake is another indicator of just how difficult it is for western players to survive and thrive with partnerships in the People’s Republic, despite the huge potential of the fast-growing market.

Vodafone pulled out of its tie-up with China Mobile in 2010, selling a 3.2 per cent stake for $6.5bn.

As the debt crisis continues in Europe, the state-run Chinese operators with their deep pockets and strong domestic businesses are now more likely to invest in partnerships with, or even acquisitions of, their foreign counterparts. ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.