Telefonica could be set to create two separate units, splitting its European and Latin American businesses into separate divisions, in order to “protect itself from any further worsening of Spain’s economic troubles”, the Wall Street Journal (WSJ) said.
It has already been reported that the company may hold IPOs for its Latin American units, similar to moves that are currently underway for its German business. This would enable it to raise funds to reduce its debt burden.
The WSJ said that continued economic weakness in Spain – Telefonica’s home market – is making it difficult for the company to carry as much debt as it has previously. As a result, it is looking to “decouple” itself from Spain, in order to gain easier access to financing.
Apparently, Angel Vila, CFO of Telefonica, 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."
While Telefonica has been able to build up its international portfolio, this has been done at the expense of a growing debt pile. With the collapse of its home economy – and weakness in its Spanish operations – the company has found its financial position come under more pressure.
The company has already said it will suspend dividends and pause its share buyback scheme, with its directors agreeing to take a pay cut, in order to reduce its cash spending.
It is also set to sell its Atento call centre business, in a transaction worth around EUR1 billion.
Separately, Bloomberg reported that Telefonica is set to price the initial public offering of its German unit at EUR5.60 per share, toward the lower-end of its previously stated EUR5.25 to EUR6.50 range.
The transaction could bring the company around EUR1 billion in additional funds.