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Telefonica Reportedly in Talks with Banks for Telxius IPO

According to a recent report by Bloomberg, Spanish telecom giant Telefonica SA TEF is in talks with several banks to conduct an initial public offering (IPO) of its infrastructure division Telxius.

Citing an unnamed source, Bloomberg reported that Telefonica is negotiating with CaixaBank, Banco Bilbao Vizcaya Argentaria, Goldman Sachs, and JPMorgan Chase as global coordinators for IPO flotation. Moreover, Mediobanca, BNP Paribas, HSBC, Santander, Citigroup, and UBS will act as joint book runners.

In Feb 2016, Telefonica created the Telxius division which was assigned the task of managing the company’s infrastructure assets. At present, Telxius manages about 15,000 wireless towers and an international submarine-cable network covering 31,000 kilometers (19,000 miles) of Telefonica. More assets are likely to be assigned to Telxius over time.

Telefonica is aiming to raise around €4 - €5 billion ($4.5 - $5.6 billion) from the Telxius IPO. The spin-off of an infrastructure unit is not new in the global telecom space. Earlier America Movil SAB AMX had spun off its Telesite infrastructure division and Telecom Italia SpA TI has also opted for the same.

The flotation of the Telxius IPO has become important for Telefonica after the European Union telecom regulator blocked the proposed sale of its O2 unit in the U.K. to 3UK of Hutchison Whampoa. The deal size was around $14.9 billion.

Meanwhile, Telefonica’s debt currently stands at approximately €50.2 billion. The company was planning to reduce its debt burden after divesting its O2 division. However, the plan fell through as the transaction failed to materialize. Recently, Liberty Global Plc. LBTYA has shown interest in acquiring O2 but nothing concrete has emerged as of now.

At this juncture, proceeds from the IPO of Telxius can help Telefonica to reduce some of its outstanding debt. Telefonica currently sports a Zacks Rank #1 (Strong Buy).

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TELEFONICA S.A. (TEF): Free Stock Analysis Report
 
TELECOM ITA-ADR (TI): Free Stock Analysis Report
 
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