Telefonica SA (TEF) plans to sell shares of its Colombian division as early as this year after halting an initial public offering for all of its Latin American assets, according to people familiar with the matter.
Telefonica, which owns 70 percent of the unit, intends to offer a minority holding in an IPO, the people said, asking not to be identified because the plan isn’t public. Telefonica still needs approval from the Colombian government, which holds the remaining shares, to proceed with a transaction, the people said.
Telefonica, Spain’s largest telephone company, is seeking to cut at least 4.3 billion euros ($5.6 billion) in net debt this year. The Madrid-based carrier could raise more than 500 million euros from the sale of as much as 19 percent stake in order to keep control of the asset, according to Andres Bolumburu, an analyst at Banco de Sabadell in Madrid.
“Following the IPO in Germany, this deal would be very positive for Telefonica,” Bolumburu said, referring to the October trading debut of Telefonica Deutschland Holding AG. “Colombia is one of the company’s most attractive assets in Latin America after it merged its fixed and mobile units last year.”
Telefonica managers and Colombian government officials plan to meet this month to discuss the transaction, the people said. The division, which offers services including fixed telephone, mobile, Internet and pay TV, reported 2012 operating profit before interest, depreciation and amortization of 607 million euros on sales of 1.77 billion euros.
Telefonica shares rose 1.4 percent to 10.65 euros at 10:19 a.m. in Madrid.
An official at Telefonica declined to comment.
After a decade-long $85 billion acquisition spree increased debt and triggered rating cuts, Chief Executive Officer Cesar Alierta last year began selling assets and has suspended dividend payments. As the German business stake sale helped ease pressure from rating companies, Telefonica halted plans for an initial public offering of its Latin American business, which generated about half of the company’s 62.4 billion euros in sales last year.
A year ago, the Spanish phone carrier merged its Colombian units -- wholly owned wireless division Telefonica Moviles Colombia and fixed-line venture Colombia Telecomunicaciones, which was 48 percent state-owned -- to cut $1.7 billion of debt. That deal left Telefonica holding 70 percent of the combined company and Colombia the remaining 30 percent, with the state stake possibly increasing by as much as 3 percentage points in 2015.
El Confidencial reported the IPO plans today.
Other Telefonica assets on a list of potential businesses for sale include its Irish and Czech divisions, a minority stake in China Unicom (762) (Hong Kong) Ltd. and assets in Central America, people familiar with the matter have said.
To contact the reporter on this story: Manuel Baigorri in Madrid at firstname.lastname@example.org