Telefónica CFO: We could split Latin American operations from Europe

Telefónica could divide itself into two separate units--one for Europe and another for its operations in Latin America--in a plan to insulate the company from any further worsening in Spain's economic woes, according to CFO Ángel Vilá.


Financing Telefónica's €58 billion debt is becoming increasingly costly due the high interest rates Spanish banks and companies are facing. In an interview with the Wall Street Journal Vilá said that Telefónica paid interest rates five times as high as France Telecom sell its bonds.

However, Vilá said the company has squashed an idea of exiting Spain, but he indicated there are possibilities to isolate Telefónica's European business from its wide-ranging and profitable Latin American operations.

"If at some point you want to have two sub-domiciles owned by the Spanish company, that is a possibility you could imagine," he said. "There are ways without changing the domicile to structurally move the group in such a way that you can minimise the issue of where we are domiciled."

The company has also confirmed active plans for a possible initial public offering of its Latin American businesses, although an IPO will not happen this year. Vilá said these stock market floatation moves were about building a "firewall" around Telefónica in case the euro zone crisis deepens.

"We have bought ourselves over two years of time to think about how we can restructure the group in case things get nastier," he told WSJ. "But we think that things will get better."  

Separately, the company is paring down the indicative price range for the planned IPO of its O2 Germany unit, according to a Reuters report, which cited unnamed sources.

Telefónica is now said to be looking for a listing at between €5.50 and €6 per share. Earlier this month the range had been set between €5.25 and €6.50 for the business. One of the sources told Reuters that the order books were well covered by the new price range.

However, Andreas Mark, a fund manager at Union Investment, commented: "We are very price sensitive when it comes to O2 and are bidding at the lower end of the offering. You don't have to own the stock at any price."

For more:
- see this WSJ article (sub. req.)
- see this Reuters article

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