Telefonica sells half its stake in China Unicom to slash its debt

Telefonica SA's decision to sell half of its stake in China Unicom (Hong Kong) Ltd, paring its seven-year venture into one of the fastest-growing wireless markets, shows the burden of debt on the Spanish operator.

The sale of 1.07 billion China Unicom shares for HK$11 billion ($1.4 billion) will cut Telefonica's holding in China's second-largest mobile-phone operator to 5 percent, the companies said last week. The HK$10.21-per-share deal values the stake at 22 percent less than its carrying value on Telefonica's accounts. Madrid-based Telefonica agreed not to sell any further China Unicom shares for 12 months.

Having spent $85 billion on acquisitions since taking over in 2000, Telefonica Chief Executive Officer Cesar Alierta is now under pressure to reduce more than 57 billion euros in net debt. Standard & Poor's cut the company's rating last month and in the past two weeks Telefonica has announced plans to slash the cash portion of its dividend and explore initial public offerings for its German and Latin American assets.