Telefonica could hold an initial public offering (IPO) of its British wireless unit this year as part of plans to raise funds to pay off debt, chairman Jose Maria Alvarez-Pallete said.
“We have been working to list it, so if today or in the next few weeks we decided to do so we could do it by year’s end if markets were right,” Mr Pallete told reporters late onSunday in Santander, Spain.
Selling a stake in the O2 unit to a strategic investor is also still an option, he said. "We could objectively do either one of the two things by year's end. If markets closed, we would wait. We don't have the obligation to list or sell at any price."
Telefonica was counting on proceeds from the sale of 02 to CK Hutchison Holdings to reduce debt before the EU in May blocked the deal on competition concerns.
The O2 sale, an IPO of Telefonica’s infrastructure unit Telxius and increasing free cash flow generation will allow Telefonica to meet its target of lowered debt, Mr Pallete said.
Operating income
The company expects free cash flow and operating income before depreciation and amortisation, or Oibda, to be higher next year than in 2016, Mr Pallete said, without forecasting how much either metric would be.
He said despite debt concerns, the company’s annual dividend of 75 cents a share was sustainable.
Telefonica could maintain the payout at that level in 2017 by giving shareholders stock if needed – a so-called scrip dividend – allowing the company to keep more cash available, he said.
In July, Telefonica kept its target of net debt to Oibda at 2.35 for “the mid-term,” compared with 3.2 at the end of June. In February, the company had said the 2.35 target would be reached this year, pending the sale of O2, which at the time was facing regulatory review.
The IPO of Telxius is progressing, with Telefonica prepared to file relevant documents with the Spanish regulator as soon as Monday, people familiar with the matter said.
Mr Pallete saidTelefonica would decide the price range as well as the percentage of the company it would offer in the next few weeks once it has gauged "investor appetite". – Bloomberg
