* Latest asset sell-offs could come in 2013
* Expects net debt of 50 bln euros at year-end
* 9-mth core operating income up 10.7 pct to 15.7 bln euros
* Revenue dips 0.3 pct to 46.5 bln euros
* Vows not to return to subsidising handsets
(Adds year-end debt expectation, quotes on LatAm and subsidies)
By Clare Kane and Robert Hetz
MADRID, Nov 7 Spanish telecoms firm Telefonica
could list Latin American subsidiaries next year, the
latest step in efforts to pare debt it estimates will be 50
billion euros ($64 billion) at year-end.
Like its regional peers, Europe's biggest telecoms group by
sales is being squeezed by weak economies, regulatory pressures
and structural changes.
It said a spin-off of Latin American businesses via a share
sale was an option as it works to cut borrowings built up over a
decade of expansion.
"No decision has been taken on such a transaction but we are
working on preparations in case we decide to move ahead with
it," chief financial officer Angel Vila said on a call to
discuss nine-month results released on Wednesday.
Telefonica Latin American Chief Executive Santiago Fernandez
Valbuena said at the weekend that a sale could take place next
Revenue from Telefonica's Latin America operations has
overtaken its European businesses for the first time and now
accounts for 49 percent of the company's turnover.
Telefonica's shares, which have lost a quarter of their
value this year on debt concerns, were down 1.2 percent at 10.09
euros by 1500 GMT, compared with a 1.9 percent decline on
Spain's blue chip index.
The Spanish group has just listed part of its German
02-branded division and has sold its call centre
business Atento. The group has also scrapped its dividend for
"We are pointing towards 50 billion euros of net financial
debt by year-end," CFO Vila said.
Telefonica said earlier on Wednesday it had shaved a further
3.2 billion euros from the 56 billion euros of debt it carried
in September, taking its net debt ratio to 2.44 times underlying
This would help the company move towards its year-end debt
target of less than 2.35 times core operating income.
"The company's year-end leverage target of 2.35x looks
achievable," said Stuart Reid, senior director at Fitch Ratings.
He said Fitch considered progress with disposals had been good,
regardless of where the debt ratio would be at the year-end.
But Banesto Bolsa analysts described Telefonica's target as
"ambitious" and estimated Telefonica would need to generate at
least 1.5 billion euros via further asset sales to meet it.
Telefonica could face higher financing costs if Spain -
rated just one notch about junk status by credit rating agencies
Moody's and Standard and Poor's - is downgraded because of the
euro zone crisis.
Telefonica's European businesses, the largest of which are
Spain, Britain and the newly-listed German unit, registered a
third quarter revenue decline of 6.8 percent to 7.44 billion
In Spain, which accounts for about one quarter of group
revenues, total customers in fixed and mobile were down by 7.5
percent in the third quarter. Telefonica is now the only player
in Spain not offering cut-price phones after rival Vodafone
reintroduced subsidies this week.
Bernstein analyst Robin Bienenstock said investors would
have to wait until 2013 to see the benefits of changes being
made. "The weakening margins in LatAm, price competition-induced
wireless declines in Spain and weaker trends against competitors
in Europe are unlikely to abate this year."
Telefonica is sticking to a year-end target for revenue
growth of between 0 and 1 percent.
It reported a 10.7 percent increase in core operating income
to 15.7 billion euros and a 0.3 percent dip in revenues to 46.5
billion euros year-on-year, slightly ahead of analysts'
forecasts in a Reuters poll.
Telefonica posted a 26.4 percent increase in nine-month net
profit, largely due to a favourable comparison with the third
quarter of last year when it paid 2.7 billion euros for laying
off workers in Spain.
The company's subsidiaries in Brazil and Germany reported
results on Tuesday, showing a 30 percent drop in profit at
Telefonica's Brazilian arm and slowing revenue growth in
($1 = 0.7812 euros)
(Additional reporting by Leila Abboud in Paris. Editing by Jane
Merriman and David Cowell)