Telefónica holds plans to spin off LatAm subsidiary

12 February 2013 | Kavit Majithia


Spanish group Telefónica has held plans to spin off its Latin American subsidiary after investor sentiment towards Spain improved.

Telefónica, which has been under heavy debt, is Europe’s largest operator by market value and the company had plans to divest a stake in its Latin American unit due to poor operating conditions in its domestic market. However, latest developments suggest it was not under any pending pressure to proceed with a spin-off, and the company has since declined to comment.

Telefónica’s CFO said in November 2012 it would only press ahead with a float if it believed in a favourable financial outcome for investors.

Its plan to sell off its Latin American unit came after Spain’s sovereign borrowing costs hit an unprecedented high for the Euro-era, and led to an increase in borrowing from the country’s largest companies.

The Financial Times learnt of the company’s plans to list 10%-15% of its Latin American business at the end of last year, with analysts valuing the unit at €40 billion. Telefónica was reportedly hoping a strong position in affluent Brazil would offset a weakening position in its domestic market, but also considered the valuation as low.