* Telefonica raises 975 mln euros from sale
* Shares placed for 10.8 euros each
* Shares fall to placement price
* More disposals to come
(Recasts, adds analyst comments, detail, share price)
By Clare Kane
MADRID, March 26 Spain's Telefonica
raised 975 million euros ($1.26 billion) with an opportunistic
sale of all of its treasury stock on Tuesday, taking advantage
of a recent share price rally to raise cash and reduce its over
50 billion euros of debt.
Telefonica shares have risen 14 percent since it released
better-than-expected results at end-Feb, a recovery from last
year's 25 percent drop as Spain took centre stage in the euro
zone crisis and Telefonica's credit rating came under pressure.
"This decision was a response to the increased interest from
the market in recent weeks due to the company's good performance
in the second half of 2012," Telefonica said in a statement.
Telefonica wants to reduce debt to under 47 billion euros by
the end of the year from 51.3 billion euros at end-2012, and to
reinstate its dividend, meaning it must shed a number of assets
this year to keep rating agencies convinced it can repay debt.
Pressure on the company has eased in recent weeks after its
2012 results showed that asset sales last year had reduced its
leverage from over 58 billion euros at end-June, though its debt
to earnings ratio of 2.36 remains above sector peers like France
But a fraught rescue plan in Cyprus could also turn up the
heat on peripheral European Union countries like recession-hit
Spain, which has benefited from improved sentiment on the debt
markets over the past few months.
"In a Cyprus contagion situation you might imagine that the
attitudes of the rating agencies and debt investors might
tighten up a bit," said a London-based analyst who declined to
"If you can find yourself an extra billion euros of
deleveraging then that's probably not a bad place to be to
relieve some pressure that might come along."
MORE DISPOSALS EXPECTED
Telefonica, Europe's biggest telecoms operator by revenue,
said it placed just over 90 million shares, equivalent to 2
percent of its capital, at 10.8 euros a share, a discount of 3.9
percent on Monday's closing price of 11.24 euros.
Telefonica's shares, which were suspended for the first hour
of trading on Tuesday, had dropped 4.5 percent by 1355 GMT to
10.74 euros, one of the biggest fallers in Europe, against a
European blue chip index up 0.2 percent.
"(The placement) might also signal that following the
stock's strong rally since the recent lows and (since) the end
of February, the company sees limited upside in the shares, at
least in the short term," Espirito Santo analyst Nuno Matias
said in a note.
The sale increased the company's equity value by 31 million
Analysts expect Telefonica to carry out more disposals this
year after it shed part of its stake in China Unicom
last year. It also sold call centre business Atento and floated
its German unit Telefonica Deutschland.
Telefonica's operations in the Czech Republic, Ireland and
central America are flagged as non-core by analysts, meaning the
company could also dispose of them. Telefonica also has stakes
in a number of other companies including bank BBVA and
Telefonica had been considering listing its growing Latin
American businesses to raise up to 6 billion euros, but shelved
that plan as it decided it had already gained enough "financial
flexibility" with other disposals.
The telecoms company sold its British broadband and
fixed-line telephony business for 200 million pounds ($303.66
million) to television group BSkyB earlier this month,
saying it would focus on its mobile business in the country.
($1 = 0.7763 euros)
($1 = 0.6586 British pounds)
(Additional reporting by Sarah Morris, Paul Day and Jose Elias
Rodriguez; Editing by Julien Toyer and Clelia Oziel)