Spanish telecom behemoth Telefonica SA (TEF) recently sold another 2.5% stake in China Unicom Hong Kong Ltd. (CHU) for approximately $865 million. In Jun 2014, Telefonica sold a 4.56% stake in China Unicom for approximately $1.4 billion. Post this stake sell, the company is left with a 2.5% stake in China Unicom which however cannot be offloaded over the next three months. Telefonica currently carries a Zacks Rank #3 (Hold).
In 2014, the stock price of China Unicom did not performed well. Year-to-date, the share price has lost 1% of value. However, Telefonica did not state the stock price volatility was the reason for stake divestment. The motive behind the stake sell might be management’s strategy to concentrate on some select markets and exit the others. This is also evident from Telefonica’s recent exit from Ireland and the Czech Republic to focus more on Germany and Brazil.
Notably, the recent acquisition of E-Plus by Telefonica has positioned the company as the largest mobile service provider in Germany in terms of subscriber count.
Last month, the company entered into a formal agreement with Vivendi to purchase the latter’s broadband arm GVT in Brazil for around $9.3 million. Telefonica will pay Vivendi $6 billion in cash and acquire $578 million of GVT’s debt obligation along with offering a 7.4% stake in Telefonica Brasil SA, a subsidiary of Telefonica SA (VIV).
For Telefonica, synergies from the acquisition appear quite promising. The GVT deal is expected to put Telefonica in a better position within the broadband segment in comparison to stronger rivals like America Movil SAB de C.V.’s (AMX) and Oi.
Additionally, GVT will expand Telefonica’s broadband network to 10.4 million homes across 21 Brazilian states apart from strengthening its broadband customer base by an additional 2.5 million. This will also raise Telefonica’s broadband market share in Brazil to an impressive 30%.
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