South Korean top 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 firm has been in talks with Unicom for various partnerships, including the possible acquisition of a stake.

 

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 SK Telecom 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 licences to build 3G mobile communications networks.

 

Before licensing, the government is likely to consolidate the top four operators, reducing the number to three.

 

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

 

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

 

A spokesman with the State-owned parent of Hong Kong-listed China Unicom declined to comment on the report on SK's possible acquisition of a stake in 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 from home or abroad 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 Unicom to turn around its CDMA business, said Qiu Lin, an analyst with the Beijing-based research house Analysys International.

 

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

 

SK Telecom has been providing some consulting services for Unicom. Investing in Unicom could also help SK Telecom develop its telecoms value-added service and Internet-related business in China, Qiu said.

 

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

 

(China Daily June 7, 2006)