SK Telecom Co., South Korea's largest mobile-phone operator, will buy as much as $1 billion of bonds convertible into a 6.7 percent stake in China Unicom Ltd. to tap the world's biggest wireless market by subscribers.

The three-year bonds will be convertible into as many as 899.7 million China Unicom shares, SK Telecom said today in a regulatory filing in Seoul, where the company is based. The South Korean company said it plans to buy the bonds on July 5.

SK Telecom Chief Executive Officer Kim Shin Bae wants to generate earnings overseas to make up for slowing subscriber growth at home, following the lead of operators such as Singapore Telecommunications Ltd. For China Unicom, the funds will help upgrade networks and boost ties with the operator that offered the world's first so-called third-generation wireless services.

``China's growing so fast and it's still got so much potential,'' said Noh Mi Won, an analyst at Good Morning Shinhan Securities Co. in Seoul. ``Buying convertible bonds instead of directly buying a stake also shaves off the risk'' to SK Telecom.

Noh has a ``buy'' recommendation on SK Telecom and expects the stock may rise to 260,000 won in the next six months. SK Telecom shares, up 12 percent this year, fell 4 percent to 203,500 won yesterday in Seoul.

Conversion Timing

The announcement follows reports from the Chinese-language Sing Tao Daily in May and the Financial Times earlier this month that SK Telecom was seeking a stake in China Unicom, which is based in Hong Kong and operates in mainland China. SK Telecom officials, including Chief Executive Kim, had previously denied the South Korean company was seeking to buy part of China Unicom.

SK Telecom will have to wait a year after the purchase before it is able to convert the bonds into China Unicom shares, according to the statement.

China Unicom, the smaller of the nation's two mobile-phone operators, is vying with bigger rival China Mobile (Hong Kong) Ltd. and fixed-line companies China Telecom Corp. and China Netcom Group Corp. (Hong Kong) to get licenses to offer 3G wireless services.

China, whose mobile-phone subscribers outnumber the population of the U.S., hasn't said when it will grant licenses or how many it will permit. The nation had 416 million cell-phone subscribers as at April 30, according to the Ministry of Information Industry.

SK Telecom and China Unicom in April 2004 formed a $6 million Beijing-based venture. UNISK (Beijing) Information Technologies Co., which is 51 percent-controlled by Unicom, provides wireless content, such as games and ring tones for mobile-phone users.