Today's Comment: Telefónica to reduce stake in China Unicom; NTT improves global cloud services.
- Telefónica is to sell a 4.56% stake in China Unicom to its Chinese stake parent.
- The move is part of the efforts by the Spanish giant to reduce debts.
Today we focus on two developments:
- Telefónica to Reduce China Unicom Stake: Telefónica has said it has agreed to sell a 4.56% stake in China Unicom (Hong Kong) Ltd to its state parent, China United Network Communications Group Co. Ltd, for about EUR1.13 billion (USD1.74 billion), Dow Jones reports. Telefónica said in a regulatory filing that the planned sale of more than 1.07 billion shares in China Unicom "forms part of the proactive management of its asset portfolio". The Spanish telecoms giant said it continues to be fully committed to its strategic agreement with China Unicom. Telefónica will own 5.01% of China Unicom following the completion of the transaction by the end of July. The stake sale is still subject to regulatory clearance.
- NTT Unit to Strengthen Enterprise Cloud Service: NTT Communications has announced that on 29 June 2012 it will launch a globally seamless enterprise cloud service to incorporate OpenFlow network virtualisation technology for networks built within and between data centres. The service is initially provided via NTT Com data centres in Japan and Hong Kong, followed by data centres in the United States, the United Kingdom and Singapore in December 2012 and in Australia, Malaysia and Thailand in March 2013.
The sale of a portion of its stake in China Unicom forms an integral part of Telefónica's debt-reduction plan. The shares in China Unicom were among the most liquid of its assets and hence the first to go, while leaving Telefónica with a strategic investment in China. Among its other plans to cut its debts, Telefónica has confirmed that it will sell shares in its German unit in an IPO (see Europe: 31 May 2012: Analyst Commentary). It is also considering listing its Latin American business, most likely through its Telefónica Brasil unit, which is already listed. Further cash-raising plans include selling Rumbno, its online booking service, and restarting the IPO of its call centre unit, Atento (see Spain: 13 June 2012: Telefónica Cancels Call Centre Unit Listing). The rationale behind the spate of asset sales is to keep its net debt to earnings before interest, tax, amortisation and depreciation ratio below 2.35 to prevent borrowing costs from rising.
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