Telefonica (TEF) and China Unicom (CHU) = BFFs!

Telefonica S.A. (NYSE: TEF) shares are seeing a little pressure Tuesday in early trading following reports the company might not exit a key holding in order to ease its debt burden.

According to Bloomberg, Telefonica is not considering selling its €3 billion holding in China Unicom (NYSE: CHU), but will instead go the traditional route of selling non-core assets, cutting its Spanish workforce, and stemming any major M&A activity.

The best comment comes from CEO Cesar Alierta, who said, "The stake in China Unicom is completely stable and we don’t plan to sell it at all...[w]e consider it a long-term and strategic alliance and that would be the case forever" [emphasis ours].

Analyst firm Sanford Bernstein said Telefonica's 9.7 percent stake in China Unicom might be worth as much as €3.1 billion. Currently, Telefonica's net debt was €56.3 billion at the end of December.

Last year, Telefonica and China Unicom entered an investment agreement, where each company would swap $500 million worth of shares.

Shares of Telefonica are about 0.2 percent lower in early trading.

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