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Telefónica commits to maintain their shares in China "forever"

Published on Feb. 29, 2012

 
Telefónica commits to maintain their shares in China "forever"

According to Bloomberg, the Spanish telecommunications operator has announced their compromise to maintain their 3.000 million euros share in China Unicom, the second largest telecommunications company in China.

César Alierta, president of the Spanish company, announced In the Mobile World Congress that is taking place in Barcelona these days their intention of growing up in emerging markets like Latin America and China. Alierta declared, after a meeting with a China Unicom’s chief, that “The compromise with China Unicom is totally stable and we do not have any intention of abandoning it”. Alierta also stated “We consider our agreement as a long term strategic alliance and we will maintain it forever”

After nine consecutive years with huge growths in the dividend, last December 15th, the company decided to reduce the remuneration to their shareholders, fact that sowed doubts over the Telefónica situation. Alierta justified the reduction because of the “significant” changes on the market and its conditions and declared that “The dividend is completely safe and we do not need to reduce it again this year”

Telefónica announced last November an extension in their China Unicom shares. The agreement included an additional exchange that allowed Telefónica to take control of a 9.7% of China Unicom, which at the same time took control of a 0.89% of the Spanish company. The agreement also included the acquisition of 500 million dollars in shares of each company by the other.

Last year, China Unicom shares appreciated by 50%, this makes the Asian operator a very profitable option for Telefónica. The Chinese company grew thanks to the clients transferred from the operator China Mobile and the sales of Smartphones 80% cheaper than Apple’s iPhone.

Telefónica rises in the Ibex a 0.7% till the 13.05 euros per share while China Unicom falls a 0.1% in Hong Kong.

Last week, Telefónica published their 2011 outcome with almost a 50% reduction in their benefits. Benefits splattered with a staff reorganization (LFAP-labor force adjustment plan) which left 6.500 employees out of their jobs.

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