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China Unicom, Telefónica Grow Closer

Telecom giants China Unicom and Telefónica have agreed to invest more in each other while raising their joint competitiveness in purchasing, roaming and service to multinationals, the Chinese carrier said in a statement.

Each company will buy US$500 million worth of shares in the other, meaning China Unicom will increase its interest in Telefonica to 1.37 percent while the Spanish firm will see its Unicom stake rise to about 9.7 percent based on current share prices, the statement said.

The agreement signed on Sunday by the two chairmen, Chang Xiaobing of China Unicom and Cesar Alierta of Telefonica, also better positions the companies to pair up in developing mobile service platforms and any new technology.

They also stand to get a stronger foothold in each other's geographic markets.

"It's a strengthening of the corporations," said Duncan Clark, chairman of the Beijing-based consultancy BDA China. "It's symbolic that that China Unicom wants to expand in Europe and Latin America. Telefonica is topping up in China."

Both firms have indicated they would deploy passive optical network technology, which increases downstream and upstream broadband capacity.

China Unicom's well-oiled WCDMA mobile network in China could become an asset for both, Clark said.

The Spanish firm, with more than 280 million customers in 25 countries, will propose to its board that it add a member from China Unicom, the statement said. A Telefonica representative already sits on the board of China Unicom, which is China's No. 2 mobile carrier with 167 million customers.

The two firms have a history of cooperation from 2008. That year Telefónica took its first stake in China Unicom, and in 2009 the two companies invested $1 billion in each other, giving the Chinese firm its first stake in the Spanish carrier.

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