SK Telecom will switch US$1 billion worth of convertible bonds into China Unicom Ltd (stock code: 600050) stock and become the carrier's second-biggest shareholder, the companies said yesterday.

The move is designed to help the South Korean-based firm expand in the world's No. 1 mobile communications market.

The step by SK Telecom represents an expression of confidence in China Unicom, the country's No. 2 mobile carrier, industry insiders said.

The bonds will be turned into 899.7 million shares on September 4, giving SK Telecom a 6.6-percent stake in Hong Kong-listed China Unicom.

SK Telecom, South Korea's largest mobile-phone operator, will acquire the shares for HK$8.63 (US$1.10) each, or about 30 percent less than Unicom's market price, according to statements from both companies yesterday.

Beijing-based China United Telecommunications Corp, the parent firm of China Unicom, will have its stake reduced from 76.5 percent to 71.4 percent, according to the statement. The balance of SK's take will come from newly issued shares.

"The move shows confidence in China Unicom - and the country's overall market - from foreign players," Sandy Shen, a telecommunications analyst at Gartner Inc, said during a phone interview.

The deal helps SK Telecom expand in a market whose mobile subscriber base reached 501.65 million at the end of June.

SK Telecom and China Unicom have already cooperated on handsets, networks and services. SK Telecom is partnering with Unicom in its code division multiple access, or CDMA, business in China, and it promised to help China develop its own standard for wireless networks, the first overseas player to support China's home-grown TD-SCDMA, or time division synchronous code division multiple access, technology.

South Korea is among the first batch countries to adopt high-speed third-generation networks, and SK has rich experience in the underlying technologies, according to Shen.

"China Unicom will get strong support (from SK)," Gartner's Shen said.