"It is reasonable for the company to convert the bonds at this time," said DBS Vickers analyst Steven Liu. "China Unicom may be broken up in the near future."
SK Telecom can convert the bonds into shares starting July 5.
"We think it's not negative to convert the bonds into shares, given the stock's rise," Dow Jones Newswires quoted an SK Telecom spokeswoman as saying. "Any concrete decision [on the conversion] will be made at the right time."
Once the bonds are converted, SK Telecom will have a 6.7 percent stake in China Unicom.
The Chinese government has said it will offer third-generation mobile services in time for the 2008 Beijing Olympics. Analysts expect China Unicom, which runs two mobile networks, will sell off each to a fixed-line operator in China as a precursor to any introduction of 3G services.
"There's not much time left for the government to make a decision on the industry restructuring," said Liu. "So, I think maybe it's the best time for SK to convert the bond."
The conversion of the bond should be neutral or slightly positive for China Unicom's share price, according to China Everbright Securities analyst Wong Chi-man.
"Most of the investors when they calculate the EPS [earnings per share], I think most of them have assumed the conversion of the CB," Wong said.
SK Telecom will probably hold on to the shares after the conversion, Liu said, as the South Korean operator wants to use its partnership to gain access to the China market.
China Unicom shares rose 1.1 percent Tuesday to close at HK$13.30.
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