Spain's Telefonica raises €1.5B with 10-year bond

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Spanish operator Telefónica has raised €1.5 billion through a 10-year bond as it seeks to preserve its investment grade credit rating by further reducing its debt mountain.

The news agency noted that Standard and Poor's affirmed Telefónica's long-term credit rating at BBB, two notches above junk, at the end of December on the assumption the Spanish telecoms group will make more "aggressive" moves to cut debt.

The operator, whose domestic market is mired in a deep recession that is having a notable impact on mobile subscriber numbers among other issues, has debts of €56 billion as of September and is facing bond redemptions this year. Reuters reported that €7.4 billion of debt is expiring in 2013 and €7.35 billion is due for repayment in 2014, according to the company's last quarterly results statement.

Telefónica's deal was handled by a group of banks headed by CaixaBank, Goldman Sachs, Mizuho, RBS, Santander and UniCredit. Investor interest in the deal exceeded €8.5 billion according to IFR, Thomson Reuters' news and analysis service.

Telefónica's problems have been exacerbated by the economic slump in Spain that caused users to ditch their mobile contracts in droves last year. For example, Telefónica's Movistar lost 284,000 subscribers in October, while Vodafone Spain shed 278,000 customers, regulator CMT said, according to Reuters.

Movistar is hoping to revive its fortunes somewhat through its new Movistar Fusion service, which allows users to make savings by buying a combined package of mobile voice and data, fixed voice and Internet and TV services. The company has already reported more than 1 million subscribers for the Fusion service.

Rival operators Vodafone Spain and Orange Spain have also since launched competing multi-play offers.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Reuters article

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