Telefonica Seeks as Much as EU6 Billion in Latin IPO

Telefonica SA (TEF) is seeking to raise as much as 6 billion euros ($7.9 billion) by listing shares of its Latin America business in Madrid and London as Spain’s biggest phone company moves to pare debt.

The initial public offering, which would include all of Telefonica’s operations in the region, will take place as soon as possible, said Gilmar Camurra, chief financial officer of the Madrid-based company’s Brazil division.

Telefonica has been divesting parts of its business to cut down on debt, which it had reduced since June by 5.5 billion euros to 52.8 billion euros as of last month. This year, the company sold shares in a German unit, divested its China Unicom (Hong Kong) Ltd. stake, and got rid of the Atento call-center division.

“This is an alternative for the company’s plans to improve our financial position and give us flexibility,” Camurra said yesterday in an interview in Sao Paulo. The company seeks to raise between 4 billion euros and 6 billion euros by selling a stake of 10 percent to 15 percent and won’t list the shares in Latin America, he said.

Managers of the Latin America group, the region’s second- biggest mobile-phone carrier behind America Movil SAB, are moving to Sao Paulo from the Madrid headquarters to keep a closer eye on the division, the executive said.

Photographer: Angel Navarrete/Bloomberg

Telefonica has been divesting parts of its business to cut down on debt, which it had reduced by 2.3 billion euros to 56 billion euros as of September. Close

Telefonica has been divesting parts of its business to cut down on debt, which it had... Read More

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Photographer: Angel Navarrete/Bloomberg

Telefonica has been divesting parts of its business to cut down on debt, which it had reduced by 2.3 billion euros to 56 billion euros as of September.

European IPOs

The Frankfurt offering of Telefonica’s German unit, operating in a market less hit by Europe’s debt crisis, was the region’s biggest IPO this year and helped the Spanish company to raise 1.45 billion euros. OAO MegaFon, Russia’s second-largest mobile-phone operator, last month raised $1.7 billion by selling shares in London.

Latin America represents almost half of Telefonica’s revenue, according to data compiled by Bloomberg. The region’s operating income before depreciation and amortization rose 4.8 percent to 2.69 billion euros last quarter as sales gained 3.8 percent to 7.62 billion euros. Still, revenue growth slowed from the second quarter’s 5.8 percent.

Chief Executive Officer Cesar Alierta is relying on Latin American growth to offset stiffer competition in Spain, where a slumping economy is hurting demand and France Telecom SA (FTE)’s Orange and TeliaSonera AB (TLSN)’s Yoigo are winning customers. Spain is still Telefonica’s biggest market, followed by Brazil.

‘Attractive Assets’

“Providing a route for investors to play the Latin American assets makes sense, given these are Telefonica’s most attractive assets,” said Guy Peddy, a London-based analyst at Macquarie Bank Ltd. “Taking into account everything else the company has done to deleverage, this process should get Telefonica into the realm of what we could call ‘full debt,’ instead of their being under pressure.”

Even with its efforts to pare debt, Telefonica is still Europe’s most indebted phone company. While most European peers have reduced dividends this year, Telefonica went further and scrapped its payout completely and will resume payments in the fourth quarter of 2013.

The shares dropped 0.6 percent to 10.04 euros in Madrid, valuing the company at 45.7 billion euros.

To contact the reporters on this story: Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Nick Turner at nturner7@bloomberg.net

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