Telefonica Said to Proceed With German IPO Plans to Reduce Debt
Telefonica SA (TEF), Spain’s biggest phone company, plans to file with regulators as early as today its intention to sell shares in the O2 Germany unit, two people with knowledge of the matter said.
Telefonica is seeking 1 billion euros ($1.3 billion) to 1.5 billion euros from an initial public offering of the business, the people said, asking not to be identified because the deliberations are private. At the high end of the range, the stock sale would be the biggest in Germany since engine maker Tognum AG (TGM) raised 1.8 billion euros in 2007.
A listing of O2 Germany could happen as early as this month, and Madrid-based Telefonica will start gauging investor interest this week, people familiar with the matter have said. Telefonica Chief Executive Officer Cesar Alierta plans to use high dividends to attract investors, the people said last week.
Faced with declining profit and more intense competition at its domestic market, Telefonica is selling assets, including stakes in its German and Latin American businesses, to help pare more than 58 billion euros of debt. In July, Telefonica decided to scrap a 1.50 euro-a-share dividend for 2012, and will resume paying half of the amount starting in the fourth quarter of 2013.
With phone companies from the Netherlands to France cutting dividends to preserve cash, Telefonica is betting a minimum of 500 million euros in O2 Germany dividends next year will offset the unit’s small size in Germany, where mobile accounts outnumber people, people familiar with the matter said last week. O2 and Royal KPN NV (KPN)’s E-Plus unit vie for the position of the third-largest wireless company in Germany, where Vodafone Group Plc (VOD) and Deutsche Telekom AG (DTE) are the leaders.
Telefonica shares rose 1.2 percent to 10.54 euros at the close of trading in Madrid yesterday, valuing the company at 48 billion euros. The stock has fallen 21 percent this year, while the Bloomberg Europe Telecommunication Services Index (BETELES) is down 3.6 percent. O2 Germany would have a market value of about 7.5 billion euros based on the high end of the IPO target.
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