Sources suggest that Telefonica has shortlisted the duo for the upcoming auction for a stake of around 45% of its rural network unit

In recent years, numerous European telcos have been making moves to reduce their debt and generate a positive cash flow in the wake of intense competition, typically through the monetisation of high value infrastructure. 
Indeed, in October last year, Telefonica said it was considering the sale of a minority stake in its Spanish fibre network, with anonymous sources at the time noting that there were between “five and ten serious contenders” seeking a 15% to 35% stake in the business.  
At the time, Telefonica’s entire fibre network, which covers roughly 26.1 million people, was valued at around €15 billion.
While this broader sale has yet to come to pass, by February 2021, Telefonica was preparing to set up a separate unit for its rural fibre network, seeking investors to purchase a stake of up to 45% in the business. 
This network, valued at around €2 billion, already connects roughly 2.5 million homes in rural, semi-rural and towns with less than 20,000 inhabitants, with Telefonica seeking to increase this number of homes passed by a further two million.
Now, reports citing anonymous sources suggest that the Telefonica has created a shortlist for the upcoming auction to sell a minority stake in the network unit, with private equity firm Allianz and Canadian pension fund CDPQ reportedly selected for the final stages of the process.
Both of these investors would seem natural partners for Telefonica, who is already working with Allianz via a fibre wholesale joint venture in Germany, and CDPQ via a similar arrangement in Brazil. In both of these markets, Telefonica aims to reach a market penetration of 97% by 2024.
According to the sources, French venture capital company Vauban and Dutch pension fund PGGM are also reportedly interested in partnering for a bid. 
Spain remains one of the most competitive markets in Europe. With some of the best fibre coverage in Europe and a wealth of mobile players, telcos’ profits have been slim for years, with numerous parties calling on regulators to help promote market consolidation. 
Now, however, this consolidation is finally beginning to take place, with Orange announcing a merger with MasMovil earlier this year. 

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