Photographer: David Ramos/Bloomberg

Telefonica Said to Study Public Offering for Argentine Business

  • Spanish phone operator is considering an IPO internally
  • Share sale is one of several alternatives being explored

Telefonica SA, Spain’s largest phone operator, is considering listing its Argentine unit, a move that would help it raise funds by tapping into investor appetite for the emerging market, according to people familiar with the matter.

The company is studying an initial public offering for a stake in the unit internally, according to the people, who asked not to be named as the discussions aren’t public. A share sale is one of several alternatives being weighed, and Telefonica may also explore network-sharing agreements with other operators, one of the people said. No final decisions have been made, they said.

A spokeswoman for Telefonica declined to comment.

A local IPO would minimize the cash demands back home as Telefonica invests in Argentina ahead of new rules that will see the business start selling bundles of fixed and mobile lines. Telefonica, Europe’s second-largest phone carrier, has 48.8 billion euros ($54.6 billion) in debt and has been working to reduce its leverage ratios.

Investors have flocked to assets in South America’s second-largest economy since economic reformer Mauricio Macri became president, with the benchmark Merval stock index up about 61 percent since Dec. 10, 2015, when the administration took over. Macri has led the country back to capital markets and has aggressively courted foreign investments.

Still, Argentina -- which is Telefonica’s second-largest market in Latin America after Brazil, accounting for 5.9 percent of global sales last year -- has suffered from years of low investments in the 12 years before Macri was sworn in. The consecutive governments of Nestor Kirchner and his wife, Cristina Fernandez de Kirchner, froze tariffs for fixed-line phone service, limited companies’ ability to transfer dividends abroad and restricted imports.

Telefonica is seeking to bolster its position in Argentina in preparation for a new legal framework allowing phone companies to offer bundles of fixed and mobile lines, internet and television as early as next year, something cable operators can do already. The rules for bundled services have been a point of contention with the government, and the Spanish company has alleged the government has prevented it from competing with local cable operator Grupo Clarin SA.

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