Reports: Telefónica mulls offering O2 shares to small investors

O2

Telefónica is considering opening up shares in its O2 UK mobile unit to small investors in order to test the market appetite for an initial public offering (IPO) and broaden the potential customer base for any sale, according to reports over the weekend.

The reports came just days after Telefónica abandoned plans to launch an IPO for its Telxius Telecom tower business, citing an “inadequate valuation” of the company.

A spokesperson for O2 UK told FierceWireless:Europe that the mobile operator had nothing new to add to its previous comments from last week, when it reiterated that various strategic options were being considered for the UK unit “including, among others, a potential initial public offering.”

However, O2 CEO Mark Evans discussed a potential retail sale with the Sunday Telegraph, saying there would be “reasonable demand” from the company’s 25 million customers. A related report from Bloomberg also said unnamed sources indicated that the Spain-based parent is considering approaching individual investors instead of just institutional buyers.

Laith Khalaf, a senior analyst at brokerage firm Hargreaves Lansdown, told Bloomberg that a diversification of the shareholder base would be a good move for Telefónica. “Additional demand from the public would be good too,” Khalaf added.

If an O2 IPO does go ahead, it could take place before the end of 2016 if the conditions are right, according to recent comments from Telefónica executive chairman and CEO José María Álvarez-Pallete López.

It’s not yet clear how much of O2 UK would be floated on the market, but Telefónica is understood to want to retain a controlling stake.

The operator said in June that it had abandoned plans to sell O2 UK following the failure of a proposed deal with CK Hutchison, and that it would reinstate the businesses results into its group earnings statement from the second quarter of 2016 onwards.

However, it still remains under pressure to reduce its heavy debt burden, which Bloomberg noted stands at €52.6 billion ($59.1 billion), particularly following the cancellation of the Telxius sale.

A sale of O2 UK shares could bring in some much-needed funds. Last week it was reported that Telefónica has so far lined up lead bankers including Barclays, UBS and Morgan Stanley. Telefónica also confirmed that it has just appointed city public-relations adviser Finsbury.

For more:
- see this Telegraph article
- see this Bloomberg article

Related articles:
Telefónica ditches Telxius IPO as investors baulk at asking price
Telefónica appoints adviser to support possible IPO for O2 UK
Telefónica confirms IPO as one option on table for O2 UK
Report: Telefónica could list Telxius tower unit in July

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