) is planning an initial public offering (IPO) of all its Latin
American units. The Spanish telecom giant is reported to consider
such an action to bring in more cash. The company will likely
consolidate its business in Latin America into a holding company
and list the shares in the New York Stock Exchange.
FRANCE TELE-ADR (FTE): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
VODAFONE GP PLC (VOD): Free Stock Analysis
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Over the last few months, Telefonica has been trimming its high
debt level, which was a result of credit-backed expansion
strategies. By raising cash via the offering, the company targets
to pull down its debt to €50 billion by the end of 2012 from €56
billion recorded at September end.
Telefonica will also opt for other cash-raising methods like
scrapping of dividend payment and asset dispositions to reach the
Based in Madrid, Spain, Telefonica S.A. provides fixed-line
telephone services, wireless communications, Internet access,
video and data transmission services, to approximately 309
Currently, Telefonica derives more revenues from its Latin
American operations than from Europe. The company expects to lead
the Brazilian market by expanding its mobile and fixed broadband
services as well as expanding its foothold in other regions like
Argentina, Peru, Chile and Columbia.
The company announced financial results for the first nine months
of 2012 in early November. Both adjusted earnings and revenue for
the period dropped year over year. While sales in Europe slid
6.4% year over year to €22.5 billion ($27.8 billion), revenues in
Latin America increased 5.9% year over year to €22.6 billion
We believe Telefonica will benefit strongly from the fixed and
mobile broadband growth across all markets in the coming
quarters. Restructuring, asset rationalization, new digital
business, enhancing financial flexibility and an improving
leverage ratio is expected to contribute to more revenue and
profits for the company.
However, the weak domestic operations, intense competition from
major European players such as
France Telecom S.A.
Vodafone Group Plc
) along with regulatory involvement and higher commercial
expenses may limit upside potential of the stock. We currently
maintain our long-term Neutral recommendation on Telefonica