€1.13 billion deal will see Spanish incumbent lower its holding to 5.01%.
Telefonica SA said Sunday it has agreed to sell a 4.56% stake in China Unicom (Hong Kong) Limited to China United Network Communications Group Co. Ltd also known as Unicom Parent, for about 1.13 billion euros ($1.74 billion).
Telefonica said in a regulatory filing the planned sale of more than 1.07 billion shares in China Unicom “forms part of the proactive management of its asset portfolio.”
Spain’s largest telecommunications company said it continues to be fully committed to its strategic agreement with China Unicon.
Telefonica will own 5.01% of China Unicom following the completion of the transaction by the end of July. The stake sale requires regulatory clearance and forms part of Telefonica’s efforts to cut debt.
Telefonica last month posted weaker-than-expected earnings, as its business in austerity hit Europe continued to suffer, making it tougher to meet closely watched targets to lower its debt as a percentage of operating profit.
With foreign investors increasingly unwilling to hold large stakes in firms listed in crisis-hit Spain, Telefonica’s shares have fallen fast in recent months, while the company has struggled to reassure shareholders.
In Europe, Telefonica is also in the process of selling its 2% stake in Portugal Telecom SA. In addition, it is preparing to sell Rumbo, an online booking service, and Atento, a call-center firm that it already tried to float last summer on Madrid’s stock market.
Telefonica is targeting income in excess of EUR1.5 billion from those moves, and is also studying the sale of some additional non-strategic assets, as well as launching initial public offerings for some affiliates in Germany and Latin America, as a mechanism to raise more funds.