Telefonica plans IPOs of German, LatAm units

31 MAY 2012

Telefonica has unveiled plans for IPOs of its German and Latin American units in an apparent move to raise cash to pay-down debt and guard against the deepening Eurozone crisis.

The Spanish-based operator giant says it is “accelerating the disposal process of non-core assets” in order to “increase its financial flexibility” and maintain “an attractive remuneration for its shareholders.”

O2 Germany is the operator’s second-largest European unit (behind Spain) and is valued at about EUR8 billion. It has several businesses in Latin America, including units in the region’s two largest markets, Mexico and Brazil, though it did not specify which ones it plans to sell. Its Latin American assets are valued at over EUR40 billion in total.

According to a Bloomberg report, Telefonica’s market value has slumped by almost EUR50 billion over the last 18 months and the firm had net debt of EUR57.1 billion at the end of March. Its problems relate mainly to its domestic operations in Spain, which have been impacted by the country’s exposure to the Eurozone crisis.
Some analysts fear that the crisis could mean Telefonica is forced to sell-off the assets at below their market value. 

The firm cut its 2012 and 2013 shareholder dividend forecast late last year. While it said yesterday that it would maintain the EUR1.50 dividend indicated for this year, it is to reduce the cash portion of the pay-out to EUR0.40, with EUR0.20 coming from share buybacks and the remainder as a scrip, or share dividend.

Telefonica said such measures would allow it to keep net debt at below 2.35 times operating income (OIBDA).