Bloomberg News

Telefonica Said to Advance on German IPO as It Adds Banks

September 05, 2012

Telefonica Said to Move Ahead With German IPO as It Adds Banks

Spain’s former phone monopoly said in May that it will explore stock sales for O2 Germany as well as its Latin American businesses as the operator tries to cut net debt of more than 58 billion euros. Photographer: Angel Navarrete/Bloomberg

Telefonica SA (TEF), Spain’s largest phone company, is moving ahead with plans for an initial public offering of its German unit after adding four banking advisers, people with knowledge of the process said.

Bank of America Corp. (BAC:US), BNP Paribas SA (BNP), Citigroup Inc. (C:US) and HSBC Holdings Plc (HSBA) have been hired as bookrunners, said the people, asking not to be identified as the process is confidential. Lead banks UBS AG (UBSN) and JPMorgan Chase & Co. are preparing analyst presentations and may begin gauging investor interest as early as the end of September, they said.

Telefonica is discussing the sale of a 20 percent stake in the O2 division for about 1 billion euros ($1.3 billion) to 1.5 billion euros, they said. The sale, part of Madrid-based Telefonica’s asset-disposal program to help repay debt and protect its debt ratings, will be a test of investors’ appetite for mobile-phone stocks as Europe’s deepening debt crisis has set back interest in new share sales.

“Telefonica continues to work on its asset disposals program, and it’s trying to keep the majority of possibilities open in order to carry out the best option for each of them,” Jose Maria Alvarez-Pallete, head of Telefonica Europe, told reporters yesterday in the town of Santander, northern Spain.

Officials at Telefonica, Bank of America, Citigroup and BNP declined to comment. An official at HSBC wasn’t available for comment.

Net Debt

Companies raised a total of $4.3 billion in western Europe this year, compared with $26.7 billion during the same period a year ago, according to data compiled by Bloomberg.

Telefonica slipped 0.7 percent to 10.38 euros at 10:09 a.m. in Madrid. Spain’s former phone monopoly said in May that it will explore stock sales for O2 Germany as well as its Latin American businesses. Its net debt amounted to more than 58 billion euros at the end of June.

The phone operator is still studying different scenarios for an IPO in Latin America and the timetable will depend on which one is picked, according to another person with direct knowledge of the matter. Telefonica is also trying to sell its call-center unit Atento, while it considers its 5 percent remaining stake in China Unicom (Hong Kong) Ltd. relevant to its strategy, the person said.

E-Plus Competition

O2 competes with Royal KPN NV (KPN)’s E-Plus division in Germany, where the two largest wireless network operators are Deutsche Telekom AG (DTE) and Vodafone Group Plc. (VOD)

Telefonica’s German unit had wireless-service revenue of 789.3 million euros last quarter, almost the same as E-Plus. The division, which also offers fixed-line phone and Internet services, reported 18.8 million mobile-phone customers as of June.

Telefonica and KPN had explored a combination of their German units and an IPO of the joint carrier this year as the former Dutch phone monopoly was fending off an unsolicited offer by Carlos Slim’s America Movil SAB. (AMXL) America Movil reached the 28 percent stake it sought in KPN on June 28, after increasing its holding in Telekom Austria AG the same month.

Telefonica, run by Chief Executive Officer Cesar Alierta, has fallen about 23 percent since the company reorganized its management a year ago, putting Alvarez-Pallete in charge of Europe and Santiago Fernandez Valbuena for Latin America. Alierta remains enthusiastic about the company’s future and doesn’t plan to step down, the person said.

“Since I took over this role, it’s been a tough year, perhaps even tougher than what we thought it would be for the company,” Alvarez-Pallete said yesterday.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Zijing Wu in London at zwu17@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net


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