Report: Telefónica strips €4.3B in cash from O2 Germany ahead of IPO

Telefónica received a €4.3 billion cash dividend from its O2 Germany subsidiary only weeks before starting a campaign to launch an initial public offering for the unit, according to a Bloomberg report. 

The dividend was paid last month, documents seen by Bloomberg indicated. Telefónica also at the same time cancelled a "capital promise" of €2.9 billion to Telefónica Deutschland Holding, leaving it with a net debt of €1.2 billion at the end of this year, according to the documents.

Commenting on the move, Carlos Winzer, a senior vice president at Moody's Investors Service, said that removing cash from O2 Germany and increasing its net debt before the IPO could help lower the unit's average cost of capital. "Telefónica Deutschland had a very strong cash position and no debt, so this move will allow the German unit to have a more efficient balance sheet structure," he told Bloomberg.

Telefónica and O2 Germany declined to comment, according to the report.

The Spanish operator is planning to sell a stake of between 20 per cent and 30 per cent in O2 Germany, the documents show, with trading expected to start on the Frankfurt stock exchange sometime this quarter. Selling a 20 per cent holding for as much as €1.5 billion would value O2 Germany's equity at €7.5 billion, people familiar with the matter have said, according to Bloomberg.

In a further move to reduce its €57 billion debt pile, Telefónica has struck a €1 billion deal to sell its Atento call centre business to private equity firm Bain Capital.

Telefónica has been attempting to offload Atento ever since it withdrew from launching the company on the stock market last year after finding little interest.

"The enterprise value is close to Telefónica's initial ambition for Atento and is 30 per cent better than the prices that had been rumoured in the press recently," Juan Rodriguez, an analyst at Banco Sabadell told Reuters.

The deal, which is expected to close this year, includes a nine-year agreement for the call centre firm to continue providing services to Telefónica. Atento had revenue of €1.8 billion in 2011.

Separately, Telefónica will invest €7.8 million over the next two year to support the Mobile World Capital project in Barcelona. The company said it will use the opportunity to promote entrepreneurship in the mobility sector and will cooperate in the consolidation of existing projects, according to Telecom Paper.

For more:
- see this Bloomberg article
- see this Reuters article
- see this Telecom Paper article (sub. req.)

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