The Wall Street Journal reports this week that Spain’s Telefonica has confirmed plans to invest EUR800 million (US$1.16 billion) to maintain its shareholding in China’s second-largest mobile operator, China Unicom. According to the newspaper, which cites a regulatory filing by the Spanish telecoms giant, the transaction will see Telefonica take a 5.5 percent stake in Unicom, making it the state-controlled operator’s largest private shareholder. The deal relates to Telefonica’s original shareholding in China Netcom, the fixed-line operator that was merged with Unicom last year as part of the Chinese government’s restructuring of its telecoms market. Under the terms of the transaction, Telefonica will increase its existing stake in Netcom to 9.91 percent for an initial payment of EUR368 million. Following the completion of the all-stock merger between Unicom and Netcom, Telefonica will then increase its holding to 5.5 percent in the merged entity.

Telefonica held a 5 percent stake in Netcom prior to the merger and announced plans to buy a further 2.2 percent of the company last year. However, without further investment, the Spanish operator’s stake in the enlarged company would have shrunk to around 2 percent. According to unconfirmed reports last year, Telefonica has been given informal approval to eventually raise its stake in Unicom to 10 percent.