Telefonica Said to Mull Selling Telxius Stake After IPO Flop

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  • Phone company said to weigh selling stakes in towers, cables
  • Infrastructure assets may attract buyout, telecom companies

Telefonica SA is considering selling stakes in its infrastructure business after an initial public offering of the unit, Telxius Telecom SA, fell through last month, people familiar with the matter said.

The Spanish phone company is speaking to advisers and is exploring whether to offer competitors or private-equity firms a holding in the entire unit or its components, which include wireless towers and undersea cables, said the people, who asked not to be identified because the deliberations are private. No final decisions have been made and the company could decide against the sale, they said.

Cellnex Telecom SA Chief Executive Officer Tobias Martinez said in an interview Thursday he’d consider investing in Telxius if it became available. Towers are an increasingly popular target for investors and companies, like Cellnex, that specialize in buying up infrastructure when phone companies sell down to cut costs. The submarine cable business, which transmits calls and data between countries, proved harder to value for investors in the IPO, the people said.

Shares of Telefonica declined 0.9 percent to 8.81 euros at 9:55 a.m. Madrid time. They have dropped 14 percent this year.

A spokesman for Telefonica declined to comment.

Telefonica is working to reduce its debt, which at 52.6 billion euros ($59 billion) stands higher than its market value. The Telxius sale, meant to value the business at as much as 3.75 billion euros, is only the latest setback to those efforts. Earlier this year, regulators also blocked the more-than 10 billion pound ($13 billion) sale of its U.K. mobile business O2 to CK Hutchison Holdings Ltd.

The company, which had planned an IPO for O2 as soon as this year, is now leaning toward listing in the first half of 2017 to avoid being marked as a forced seller, the people said. Additional concern over Brexit and the U.S. presidential election may temper investor appetite before 2017, they said.

Telefonica Chairman Jose Maria Alvarez-Pallete has said he may proceed with an IPO of O2 by the end of this year, if market conditions are right. The carrier may also market part of the IPO to individual investors to broaden the owner base and stoke appetite for a sale, people familiar with the matter said previously.