Morgan Stanley to advise Telefónica on Latin America spinoff

Morgan Stanley to advise Telefónica on Latin American spin-off

13 January 2020 | Alan Burkitt-Gray

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Investment bank Morgan Stanley has won the business to analyse Telefónica on its operations in Argentina, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela.

The bank will look at a number of options, including disposals, initial public offerings (IPOs) of shares and joint ventures for the division, which has been named Telefónica Hispanoamérica.

The Spanish group’s interests in Brazil are not affected by the move. They will remain under the control of the main company, which is based in Madrid.

Telefónica’s executive president, José María Álvarez-Pallete, first announced plans to review the future of the eight-nation division at the end of November 2019, when it decided to focus on four nations only, Spain, Brazil, Germany and the UK.

German and UK operations run under the O2 brand, and Telefónica has tried to split off all or part of O2 UK a number of times in the lasts few years.

In the November announcement, Álvarez-Pallete said the group’s infrastructure business, including its stake in Telxius, would be included in a new division, Telefónica Infra.

According to a leaked report by investment bank Goldman Sachs the Telefónica Hispanoamérica division has assets worth €13.5 billion, around 14% of the group’s overall value of $95 billion. Brazil, which will remain within the group, is worth €17.5 billion.

Telefónica moved into Latin America in a major way in 2004 when it bought the regional operations of BellSouth – now part of AT&T – for $9.5 billion. The following year it bought O2, an independent mobile group that had earlier been spun out of BT, for £17.7 billion – then equivalent to €26 billion.

Telefónica has not announced a time scale to receive Morgan Stanley’s recommendations on the future of Telefónica Hispanoamérica.

A few days ago Phoenix Tower International (PTI) entered into purchase, sale and master lease agreements with Telefónica over towers in Ecuador and Colombia.