MADRID, September 4, 2008 (AFP) - Spanish telecoms giant Telefonica said Thursday it will increase its stake in top Chinese operator China Netcom, giving it an entry into an even larger Chinese group being formed by Beijing.

Telefonica said it will in due course hold 5.5 percent of this new Chinese telecoms operator after buying an additional 5.74 percent in China Netcom for some 800 million euros (1.16 billion dollars).

Telefonica already holds 5.0 percent of China Netcom, which is merging with China Unicom under Beijing's oversight to form a giant national telecoms group.

Telefonica is in the process of buying another 2.2 percent China Netcom stake for 309 million euros under an agreement reached in January.

The additional 5.74 percent holding will be bought in two stages -- 2.71 percent for 368 million euros and then 3.03 percent for between 392 and 434 million euros, Telefonica said in a statement.

The acquisition of the 2.71 percent holding will be made in the coming days, giving it an overall China Netcom stake of 9.9 percent, it said.

The 3.03 percent will be bought after China Netcom has merged with China Unicom, giving Telefonica a 5.5 percent holding in the new Chinese entity.

Telefonica acquired its initial stake in China Netcom in 2005, with the investment made to gain access to one of the largest and fastest growing telecoms market in the world.