Spanish Telecom giant,
), has stalled the planned IPO (initial public offering) of its
Colombian subsidiary until next year. Unfavourable stock market
conditions and a pending presidential election in the country
have resulted in the postponement.
In Apr 2013, Telefonica planned to list its Colombian unit to
strengthen its capital structure as it continues to struggle
against market leader,
America Movil S.A.B de C.V.
). The company intends to raise $644.0 million (€500 million)
from the share sale by offloading a 19% stake in the
However, the presidential election due in May 2014, is
complicating matters for the telecom behemoth. Although
Telefonica holds a majority 70% stake in the company, the
remaining control lies with the Colombian government. Therefore,
the Spanish giant needs the government's approval before
divesting the stake, which the government is unwilling to give.
Adding to the problem is the declining stock market in the
emerging countries and Telefonica's huge pension fund deficit of
Telefonica has one of the highest debt burdens within the
industry with an outstanding debt of approximately $68.43 billion
at the end of the first quarter of 2013. The IPO is part of the
company's policy of divesting its non-core assets to reduce its
huge debt burden. Telefonica is expected to reduce its debt by
approximately $6.4 billion (€5 billion) by the end of 2013.
The telecom behemoth has stopped paying dividends and is
planning a widespread restructuring to considerably reduce its
leverage. The company raised $1.93 billion (€1.45 billion) by
listing its German unit, Telefonica Deutschland, and has also
sold its minor stake in
China Unicom Limited
) for $1.47 billion (€1.13 billion).
Recently, Telefonica agreed to sell its Irish operations to
Hutchison Whampoa's 3 Ireland for $1 billion (€780 million) and
offloaded a 40% stake in its Central American operations for $500
million (€ 389 million).
Owing to continuous struggle in Europe and market saturation
in Brazil, Telefonica depends on smaller Latin American countries
for growth. We believe that the IPO delay could hurt the
company's expansion as the company recently won a 4G license in
Latin America's fourth largest economy, Columbia.
Currently, Telefonica carries a Zacks Rank #3 (Hold). Among
) with a Zacks Rank #2 (Buy) is a better option for
AMER MOVIL-ADR (AMX): Free Stock Analysis
CHINA UNICOM (CHU): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
TELUS CORP (TU): Free Stock Analysis Report
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