Telefonica may make use of the proceeds from its planned sale of O2 UK to Hutchison Whampoa to fund its acquisition of Brazilian fixed operator GVT and therefore reduce the size of a planned capital increase.
“With the O2 sale, the issuance could be smaller than €3.4 billion,” Telefonica CFO Angel Vila told Bloomberg. He also said that press reports of a capital increase of up to €5 billion were unfounded.
The Spain-based company announced its plan to buy GVT in October last year; Brazil’s telecoms regulator Anatel approved the deal in December. Telefonica has agreed to pay GVT’s parent company Vivendi €4.66 billion in cash plus a 12% stake in Telefonica Brasil, once it has absorbed GVT.
Hutchison Whampoa entered exclusive talks with Telefonica in January over a £10.25 billion deal to acquire O2 UK and merge it with 3UK, creating the country’s largest mobile operator by subscribers.
The proposed transaction will see Hong Kong-based Hutchison pay Telefonica £9.25 billion upfront, and a further £1 billion once the cumulative cash flow of the combined company reaches an agreed threshold. However, the deal is expected to be subject to considerable regulatory scrutiny.
For Telefonica, selling O2 would help it pay down its hefty debt and also allow it to focus on its businesses in Spain, Germany and Latin America, where it operates in 10 countries.
