Telefonica sells mobile phone masts in Europe, Latin America for 7.7 bn euros

Spain’s Telefonica said Wednesday it will sell its telephone masts in Europe and Latin America to US-based telecom infrastructure firm American Towers for 7.7 billion euros ($9.4 billion) in cash.

The sale of the nearly 31,000 mobile phone masts which its Telxius subsidiary owns in Spain, Germany, Brazil, Peru, Chile and Argentina will generate a capital gain of 3.5 billion euros, the heavily indebted Spanish telecoms giant said in a statement.

Telefonica president Jose Maria Alvarez-Pallete said the deal would allow the company to focus on its “most ambitious goals” such as the merger of its O2 mobile business with Virgin in Britain, the purchase of Oi mobile in Brazil and debt reduction.

“This is a deal that makes strategic sense within our roadmap,” he added in the statement.

Telefonica announced at the end of 2019 that it would focus on its most profitable markets — Spain, Britain, Germany and Brazil — and pull out of its less profitable ones, such as those in smaller Latin American countries, as it tries to reinvent itself in the face of stiff competition.

The former state monopoly said it would use the proceeds of the sale to cut debt by 4.6 billion euros.

Telefonica’s debt stood at 36.7 billion euros at the end of September.

Under the terms of the deal, American Towers will lease the phone masts back to Telefonica, which holds a 50.1 percent stake in Telxius.

Following the divestment of its tower division, Telxius assets will comprise mainly of an undersea cable between Europe and the United States.

Analysts at Spanish bank Bankinter welcomed the deal, calling it “very good news for Telefonica, which is succeeding in significantly strengthening its restructuring process by monetizing non-strategic assets”.

With the operation, Telefonica becomes the latest European operator to seek to cash-in on valuable infrastructure assets.

British telecommunications giant Vodafone plans to list its tower unit during the first half of 2021 while French telecoms group Orange has said it will create a stand-alone tower operating unit.

Shares in Telefonica closed up 9.67 percent at 3.95 euros, outperforming Spain’s Ibex 35 index of most traded shares ended the day up 0.18 percent.