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Spanish incumbent received ‘inadequate’ valuation of its infrastructure unit.
Telefonica has scrapped plans for an initial public offering (IPO) of its infrastructure unit Telxius.
Telefonica said earlier this month that it hoped to raise up to €1.5 billion from the flotation. It aimed to sell a 36.36% stake in Telxius, with an over-allotment option that would increase it to 40%.
"Telefonica and the joint global coordinators have decided to abandon the offering, considering inadequate the valuation of the company, Telxius, implicit in the purchase orders received," said the Spanish incumbent in a brief statement on Thursday.
Launched in February, Telxius is responsible for managing and monetising Telefonica’s global network infrastructure. The subsidiary oversees 16,000 cell sites and more than 31,000 kilometres of fibre optic cable. It confirmed plans to push ahead with an IPO earlier in September.
Scrapping the IPO represents yet another setback in Telefonica’s bid to reduce its heavy debt burden.
In May, the European Commission blocked the £10.25 billion (€11.88 billion) sale of the company’s O2 UK arm to 3UK parent CK Hutchison, a deal that would have helped Telefonica pay off a big chunk of its debt.
"We believe that the failure of this IPO will not be taken well by the market," said Haitong Research, in a research note on Friday.
"This is the second operation in a row that Telefonica cannot see through in its efforts to reduce debt," the brokerage said. "Telxius’ IPO was much less important than the O2 UK sale earlier in the year, but naturally this puts pressure on the company to keep exploring all its options to reduce leverage," the brokerage said.
Telefonica is currently mulling listing O2 UK, with reports earlier this week claiming it has selected banks to handle the process.
