Telefonica will sell up to 40 per cent of Telxius, its infrastructure unit, to global investment firm KKR Group for €1.3 billion as part of efforts to cut debt.

The Spanish operator will remain the anchor client for Telxius’ tower and cable businesses. It will also keep a majority stake and operational control of Telxius and continue to consolidate it into its accounts.

Earlier in the month it was reported  Telefonica wanted to sell a larger stake, 49 per cent, for at least €1.47 billion based on the valuation of a failed initial public offering (IPO) of the business in September.

The deal implies an enterprise value of €3.7 billion for Telxius and confirms the valuation established for the attempted IPO, Telefonica said in a statement.

The sale is part of a strategy to “optimise its asset portfolio and allocation of capital, and complements its plan for organic debt reduction”, which stands at around €50 billion.

Jesus Olmos, member and global co-head of infrastructure and head of Spain at KKR, said the combination of Telefonica’s industrial expertise and KKR’s financial and operational support will help Telxius as it continues to scale and grow.

“We are confident that the exploding demand for mobile data, driven by the rise in 4K and virtual reality content, together with the need for reliable internet infrastructure will help drive strong growth in the business,” he added.

The deal, subject to regulatory approvals, includes an initial sale of a 24.8 per cent stake for €790 million, as well as the option to acquire and sell an additional 15.2 per cent stake for at least €485 million.

Telxius owns and operates a portfolio of around 16,000 telecommunications towers in five countries. It also manages an international network of 65,000 km of submarine fibre optic cables, of which it owns around 31,000 km.

According to Telefonica, both businesses benefit from growth in their core markets, as the use of mobile data and the demand for reliable internet connectivity continue to grow rapidly, particularly in Spain and Latin America.