South Korea's leading mobile phone operator, SK Telecom, is in talks to buy a stake in China Unicom, the smaller of China's two cellular operators.

 

A spokesman for SK Telecom China said the company is in talks with China Unicom for various partnerships, including the possible acquisition of a stake in the China telco.

 

But "no arrangements have been finalized," he told China Daily yesterday.

 

According to a report by the Financial Times, SK Telecom plans to buy a 10 percent stake in China Unicom for about US$1.1 billion.

 

"We are always seeking business opportunities in China," the spokesman said.

 

"But the continued delays in 3G (third generation) licensing in China and a possible consolidation of Chinese operators have made everything uncertain."

 

The Chinese government has yet to decide when and how to award operators with licenses to build 3G mobile communications networks.

 

Before licensing, the government is likely to consolidate the top four operators -- China Mobile, China Unicom, China Telecom and China Netcom (CNC), reducing the number to three.

 

Unicom runs two separate cellular networks, based on the GSM and CDMA standards, which have put the telco under heavy financial pressure.

 

A senior executive with China Unicom, who asked not to be named, said last month that it is becoming increasingly difficult for it to operate two cellular networks.

 

A spokesman with the state-owned parent of Hong Kong-listed China Unicom declined to comment on SK's possible acquisition of a stake in China Unicom.

 

But China Unicom Chairman Chang Xiaobing said in March, when releasing financial results for 2005, that the firm planned to introduce a strategic investor, domestic or foreign, to improve the performance of the CDMA business.

 

In 2005 alone, China Unicom's CDMA service suffered a loss of about 200 million yuan (US$25 million).

 

The introduction of SK Telecom as an investor, if successful, could help China Unicom to turn its CDMA business around, said Qiu Lin, an analyst with Beijing-based research company, Analysys International.

 

"SK Telecom's strong capability in marketing and developing compelling mobile applications could be attractive for Unicom," Qiu said.

 

SK Telecom already provides China Unicom with consulting services, but further investments in China Unicom could also help it develop its value-added telecoms services and Internet-related business in China, Qiu said.

 

SK Telecom established a joint venture with Unicom in 2004 to develop value-added telecoms services.

 

SK Telecom's Internet affiliate, SK Communications Co, acquired Chinese Internet portal ViaTech for US$6 million in 2004 and launched a Chinese-language version of its popular Cyworld Weblog services in 2005.

 

(China Daily June 7, 2006)