China’s second-largest mobile operator, China Unicom, has entered into a strategic alliance with Spain’s Telefónica. Unicom and Telefónica’s longstanding strategic relationship has seen international law firms competing for a share of the deal, with Freshfields, Clifford Chance and Sullivan Cromwell facilitating the transaction.

Sullivan & Cromwell and Freshfields are providing Unicom with legal advice on United States and Hong Kong laws, and Clifford Chance is acting for Telefónica. Freshfields’ Hong Kong-based partners Teresa Ko and Grace Huang, along with Madrid corporate partner David Franco, are acting for Unicom. The S&C team is led by Hong Kong-based partner Chun Wei. Clifford Chance’s Hong Kong-based partner Cherry Chan (pictured) led the firm’s team with advice to Telefónica.

The agreement saw a strategic alliance occur between Unicom and Telefónica, which will develop their combined customer base of over 550 million people. In addition, the two companies have also jointly agreed to invest the equivalent of US$1bn in the other party, through each party’s shares. “This is the fourth deal we have worked on for Telefónica with China and it has been fascinating to watch the relationship between the companies develop,” said Chan.

“This is effectively two deals in one – an inward investment into China by a major foreign multinational and a China outbound deal bound into one package – which increases the complexities.” Chan is confident that similar deals will continue to take place. “As we continue to emerge from the financial crisis, we will see more strategic deals of this kind,” she said.

The completion of the investment will see Telefónica’s shares in Unicom increase to about 8%, with Unicom holding approximately 0.89% of Telefónica’s shares. The deal also gives Unicom access to markets in Spain, Europe and Latin America. China Unicom, listed on both the HKSE and NYSE, has fixed-line and mobile operations in 31 provinces. Last October, the company successfully merged with China Netcom Group Corporation, who won the ALB awards for China Deal of the year earlier this year.