Telefonica prepares for partial listing of Telxius, to decide on O2

SANTANDER, Spain (Reuters) - Spain's telecoms group Telefonica TEF.MC said it plans to float a minority stake in its telecoms masts business Telxius, and said it would hold a partial sale or an initial public offering (IPO) for its British unit O2 before early 2017.

The sign of Telefonica building is seen in Caracas, Venezuela July 30, 2016. REUTERS/Carlos Jasso

Telxius’s listing, which will take place during the second half of the year, is part of its plan to cut its 53 billion euros ($59.23 billion) of debt after Europe’s antitrust watchdog blocked the sale of O2 UK earlier this year.

The free float in Telxius, which had revenues of 680 million euros in 2015, will be at least 25 percent, Telefonica said in a filing to Spain’s stock market regulator.

In addition to Telxius, Chairman Jose Maria Alvarez-Pallete said the company would announce its decision on O2 UK in the coming weeks and either a partial sale or a listing would take place before early 2017.

The European Union's competition regulator in May blocked CK Hutchison Holdings' 0001.HK 10.3 billion pound ($13.70 billion) acquisition of O2 UK from Telefonica, ruling that it would have led to higher British mobile prices.

“We have decided that we are not going to sell the control of O2 in Britain,” Alvarez-Pallete told reporters in the city of Santander. “In the coming weeks we will decide if it will involve a listing or the entry of new shareholders in O2 UK.”

Alvarez-Pallete also said the price and final percentage for Telxius’s listing would be confirmed in the coming weeks, and it did not plan to sell more than 49 percent to maintain an operating majority.

A dividend cut has often been mentioned by analysts as a option for Telefonica to cut debt, although the group has said its 2016 dividend is covered thanks to free cash flow generation. Alvarez-Pallete said cash flow growth was key to maintaining the dividend, reiterating Telefonica would review it at the end of the year.

($1 = 0.8949 euros)

($1 = 0.7519 pounds)

Writing and additional reporting by Angus Berwick, editing by Robert Hetz and Louise Heavens