China Unicom Ltd. CHU recently signed a pact with Telefonica Brasil S.A VIV to share their international data center capacities and cloud applications including Infrastructure as a Service (IaaS) with virtual servers and multi-cloud solutions. The agreement will help both the companies serve their multinational clients who are aiming at international expansion. Both China Unicom and Telefonica Brasil expect significant economies of scale as a result of this collaboration. Earlier this year, the two companies had signed an agreement to source smartphones based on shared specifications.
Creating a Common Platform
The agreement will help China Unicom support its clients trying to enter into the European and the American market using Telefonica’s infrastructure. In the same way, Telefonica Brasil too, will be able to use China Unicom’s resources for its own client base. The combined approach will empower both the companies to achieve higher efficiency, seamless data sharing and create more business opportunity for their clients. Although the agreement currently focuses on sharing three data centers from each party, more data centers will be added from time to time.
Expected Synergies
The resource sharing agreement enables both companies to extend their operations without building any new infrastructure, thus saving on money and time. Pooling their expertise will allow greater flexibility in operation and generate technological innovation without the need to recruit new technicians or provide additional training to staff, owing to the in-built access to specialized levels of resources and IT skill sets.
The Bottom Line
With both Google Inc. GOOGL and Apple Inc. AAPL reportedly investing millions of dollars in building data centers across Europe, Telefonica Brasil and China Unicom too are vying for a global presence. The infrastructural strength of the two companies, when combined, should help enhance their capabilities, thus attracting more multinational clients in the future.
China Unicom currently carries a Zacks Rank #5 (Strong Sell) while Telefonica Brasil bears a Zacks Rank #3 (Hold).
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