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Telefonica reportedly wants TI to raise cash; EU investigates Ireland deal

  • Sources tell Reuters that Telefonica (TEF +1%), fresh off reaching a deal to eventually take full control of holding company Telco's 22.4% Telecom Italia (TI +3.2%) stake, is set to give its approval to a series of moves meant to improve TI's balance sheet.
  • In addition to a sale of TI's 67%-owned Brazilian unit TIM (TSU -2%), ideas on the table are said to include a €2B ($2.7B) capital raise, a dividend cut, and the sale of TI's Argentine unit (TEO -5.1%) and Italian mobile towers.
  • No imminent decision is expected regarding the sale of TIM. Brazilian regulators, opposed to selling TSU in full to a rival carrier, are reportedly coming around to the idea of allowing it to be sold piecemeal to them, rather than demanding a sale to an outside party.
  • Reuters add "insiders" are concerned Telefonica will unload its TI stake once the TIM sale is finished. Telefonica has been busy trying to pare its debt load by shedding assets in slow-growing European markets, as evidenced by the recent sale of its Czech unit.
  • Meanwhile, the EU has opened an antitrust investigation into the €850M sale of Telefonica's Irish unit (O2 Ireland) to rival Hutchison. A decision will be made by March 24, 2014.
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